The Financial Conduct Authority (FCA) has issued a fresh warning to drivers caught up in the car finance compensation row, urging them not to use claims management companies (CMCs) or no-win-no-fee law firms to chase compensation.
This follows a surge in interest from drivers who believe they were overcharged for car finance deals due to Discretionary Commission Arrangements (DCAs). These now-banned practices let brokers and dealers tweak interest rates to earn bigger commissions, without telling the customer.
The FCA says it is preparing a simplified redress scheme to deal with any mis-selling. But it has been clear in a statement published this week: there’s no need to pay anyone else to make a claim. ‘We would aim to make any scheme easy for consumers to understand and participate in, without needing to use a claims management company or law firm,’ the FCA said.
‘People should wait for more details rather than taking action now that might cost them money unnecessarily.’ It follows widespread concern that claims firms are taking advantage of consumer uncertainty, charging fees of up to 30% of any payout.
How did we get here?
This is all about how car finance was sold in the past, particularly Personal Contract Purchase (PCP) and Hire Purchase (HP) deals.
Before DCAs were banned in 2021, lenders often paid commission to brokers or dealers based on the interest rate the customer was charged. This created a clear conflict of interest, and the FCA now believes many people may have been unfairly charged as a result.
Tens of thousands of complaints have already been made, and several major lenders, including Lloyds Banking Group and Santander, have set aside millions to cover potential payouts. A Supreme Court decision in July 2025 is expected to shape the outcome of any future compensation scheme.
What this means for you
If you’re affected or worried that your car finance deal may have included an unfair interest rate, the most important thing is not to panic. The FCA is advising consumers to hold off from making claims through third parties, because its planned redress process will be designed to be simple, fair and free.
That means you won’t need to pay a claims firm or a lawyer to do it for you. In the meantime, be cautious about online adverts or cold calls that offer to help win compensation. Some of these services are charging up to 30% of any payout, which could cost you hundreds of pounds unnecessarily.
If you think you may have a claim in future, it’s a good idea to gather your finance paperwork and keep it safe. The FCA will share more information after the Supreme Court ruling in July, and we’ll keep you updated here on Parkers with what to do next.
Editor’s view: Don’t get ripped off twice
This is a classic case of one industry exploiting confusion caused by another. It’s outrageous that some claims firms are trying to charge struggling drivers a slice of their own compensation before any formal redress scheme has even been announced.
If you’re angry about your car finance deal, I hear you. But the FCA is being very clear: don’t pay anyone to make a claim right now. Wait for the official scheme, which is designed to be free and simple. We’ll follow this closely and make sure Parkers readers know exactly what to do when the time is right. You can trust us to help you cut through the confusion and do the right thing.
Keith Adams – Parkers editor
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