More consumers who bought their motor vehicle using car finance could be entitled to complain about commissions they paid – with the potential for compensation – in a move that may affect thousands of drivers.
Often when car dealers sell a car they would receive a payment, known as commission, from the lender providing motor finance on the purchase. In many cases the car buyer was not told about this commission, which could make the purchase more expensive.
A new court ruling and announcement by watchdog the Financial Conduct Authority (FCA), which has been investigating the motor finance sector, could mean many more consumers are eligible to make a complaint and potentially get compensation, if they have paid any commissions on their car finance.
More complaints
On 13 November 2024 the FCA said in a statement it is thinking about giving car finance providers more time to respond to complaints from consumers about motor finance they took out. It will decide on this in the next two weeks.
In a surprise move, the planned extension would also include dealing with complaints where a non-discretionary commission, also known as a fixed commission, was paid by consumers when they signed up to a financing agreement to pay for their car.
The FCA’s investigation into motor finance is currently limited to discretionary commission arrangements (DCAs), which were banned by the FCA in 2021, on the grounds they provided an incentive for brokers to increase the interest rate a customer paid for their motor finance. The FCA asked firms to review their practices and, where harm was identified, to address this.
However a recent court case has opened the door for consumers to lodge complaints about fixed commissions too, prompting the FCA to consider giving motor finance firms more time to deal with those grievances as well – with many more complaints now expected.
Fixed commissions
The FCA’s move follows the Court of Appeal’s 25 October judgment in Hopcraft v Close Brothers Ltd, Johnson v Firstrand Bank Ltd, and Wrench v Firstrand Bank Ltd. The Court of Appeal decided it was unlawful for car dealers to receive a commission from the lender providing motor finance without obtaining the customer’s informed consent to the payment.
This means the car buyer should have been told all ‘material facts’, including the amount of the commission and how it was to be calculated. The judgment related to fixed commission in motor finance agreements as well as discretionary commission arrangements.
The two motor finance lenders involved in the cases intend to appeal to the Supreme Court. If permission to appeal is granted, the FCA will consider intervening to share its expertise to assist the Court in its decision, and it can be expected to be on the side of consumers.
The FCA has also said firms authorised by the FCA must meet regulatory rules, as well as wider legal requirements, which suggests the FCA could still take action on fixed commissions, as well as its current probe into DCAs.
Eligible claims could double
Consumer rights campaigner Martin Lewis said including fixed commission in complaints, in addition to discretionary commission, could double the number of consumers eligible to complain and potentially receive compensation from their car finance provider.
A spokesperson for the FCA told Good Money Guide: “Yes – subject to consultation, [we] would extend the time firms have to issue a final response to all motor finance commission complaints, not just those involving discretionary commission.”
They added: “We are considering the impact the Court of Appeal’s judgment has on our review into historical DCAs in motor finance, including its timeline and scope. This will inevitably be influenced by any decision of the Supreme Court to hear an appeal and, should it do so, its timelines.”
How to claim
If you think you unfairly and unknowingly paid commission – fixed or discretionary – on your car finance deal, you are entitled to complain about it.
- You normally need to complain within six years of the problem happening or, if later, within three years of you becoming aware that you had cause to complain.
- Remember, you do not need to use a claims management company to make a complaint. Lots of claims companies offer this service, but you have to give them a big slice – up to 25% – of any compensation you get.
- You simply need to look at your car finance paperwork to find out which firm provided the finance when you bought your car, then write or email their complaints department directly. Include all of your details and details of the finance; loan number, how much for, when it was taken out – as much detail as you can.
Unless the finance provider resolves your complaint within three business days, all firms must reply in writing to let you know they’ve received your complaint.
Firms usually have to resolve your complaint within eight weeks. But the FCA has given firms until at least 4 December 2025 to provide final responses to complaints about motor finance where a discretionary commission arrangement (DCA) was involved.
The FCA is now weighing up whether to also give firms longer to respond to motor finance complaints involving other types of commission, like fixed commission – but currently it is still eight weeks.
If you are unhappy with a firm’s response to your complaint you can take your complaint to the Financial Ombudsman Service (FOS). It’s straightforward and won’t cost you anything. Here is a step-by-step guide on how to lodge a complaint with the FOS – do it within six months of receiving a final response from the firm, or they may not be able to help.
Many more people are now expected to make a complaint – and claim for compensation – against their motor finance provider.
In a statement, the FCA said: “Motor finance firms are likely to receive a high volume of complaints in response to the recent Court of Appeal judgment.”
The FCA wants an extension for firms to deal with all types of motor finance commission complaints to allow firms time to consider how these might be “efficiently and effectively handled”.
“This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market,” the watchdog said.
What car dealers say
Good Money Guide asked Umesh Samani, Chairman and founder member of the Independent Motor Dealers Association (IMDA), what would be the impact of an expansion of the scope of the FCA investigation – and any subsequent compensation – to include both fixed and discretionary commissions.
“It has major implications for the automotive finance landscape,” he said. He also defended car dealers.
“The headlines always seem to imply it’s been the dealer’s fault. For some time consumers have been able to ask dealers how much commission they got, but in the majority of cases the dealers have never been asked,” he said.
Loss of income
If the FCA broadens its investigation to include not only discretionary commission arrangements but also fixed commission models, “car dealerships may face substantial operational and financial impacts [as] dealerships have traditionally relied on commissions as a key income stream”, Samani said.
For dealerships, he said this could mean more compliance costs, higher financial risks due to refunds, and a move to fixed fees and transparent pricing models to minimise regulatory risks.
Impact on motor finance firms
For motor finance providers, Samni said they would also need to overhaul their practices if the FCA expands its scrutiny to all commission types.
“Fixed commission models, previously viewed as less vulnerable to regulatory action, may now require additional transparency,” he said.
This may include providers ensuring all financial documents – from loan contracts to commission agreements – clearly outline commission amounts, fees, and rationale.
“Providers who are already compliant with FCA’s Consumer Duty guidelines on transparency and fair pricing may have a head start, but they’ll still need to ensure fixed commission arrangements meet these broader transparency requirements,” Samini said.
Overall, finance providers may even reconsider the viability of certain commission-based partnerships, he added.
Laura Miller has been a financial journalist for more than 10 years, and was on staff at the Telegraph before going freelance in 2019. Her experience includes hosting podcasts and panels, and she writes for the Times and Sunday Times, Daily Mail, Mail on Sunday and the Sun, as well as trade titles. She now lives by the sea in Aberystwyth, west Wales.
You can contact Laura at laura@goodmoneyguide.com
