What Is a PCP Claim? A Complete Guide for UK Drivers
If you financed a car between 2007 and 2021, there is a strong chance you are owed money. The UK motor finance scandal has brought PCP claims to the forefront of consumer law, and millions of drivers are now pursuing refunds for hidden commissions that inflated the cost of their agreements. MotorRedress (www.motorredress.co.uk) was established specifically to help UK drivers navigate this process — but before you submit a claim, it pays to understand exactly what a PCP claim is, how the mis-selling occurred, and what you can realistically expect.
What Is a PCP Agreement?
Personal Contract Purchase (PCP) is a form of hire purchase that became the dominant car finance product in the UK from around 2012 onwards. By 2021, PCPs accounted for roughly 80% of all new car sales by finance. The structure works as follows:
- Deposit — you pay an upfront sum, typically 10% of the car's value.
- Monthly payments — you pay a fixed amount over an agreed term, usually 24–48 months. These payments cover depreciation and interest, not the full vehicle price.
- Guaranteed Minimum Future Value (GMFV) — at the end of the term, the lender guarantees the car is worth at least a specified amount.
- Balloon payment / handback / part-exchange — at the end, you can pay the GMFV to own the car outright, hand it back, or use any equity as a deposit on a new deal.
The key feature that distinguishes PCP from a simple loan is the deferred balloon payment. Because you are not financing the full vehicle price, monthly payments are lower — which made PCP highly attractive to consumers who prioritised cash flow over long-term cost.
Why Are PCP Agreements Under Scrutiny?
The problem is not the PCP structure itself. It is the way dealers and brokers were secretly incentivised to increase the interest rate charged to customers.
Under an arrangement known as a Discretionary Commission Arrangement (DCA), lenders gave car dealers the power to set — or "discretionarily" adjust — the interest rate within a permitted range. Crucially, the higher the rate a dealer set, the larger the commission they received. This created a direct financial incentive for dealers to charge customers as much as possible, with no obligation to tell the customer that (a) a commission was being paid, or (b) the dealer had any control over the rate.
The Financial Conduct Authority (FCA) reviewed this market and found the practice systemically harmful. In January 2021, the FCA banned discretionary commission arrangements outright. The regulator subsequently estimated that 14.2 million affected motor finance agreements were written between April 2007 and January 2021.
What Is a PCP Claim?
A PCP claim is a formal complaint seeking compensation for financial loss caused by an undisclosed commission arrangement on your PCP agreement. More broadly, it may also cover HP (Hire Purchase) agreements that included the same hidden commission model.
The legal basis draws on several overlapping frameworks:
- Common law bribery — a broker (the dealer) received a payment from the lender that created a conflict of interest, without the customer's informed consent.
- FCA Consumer Duty (and its predecessor, the Treating Customers Fairly principle) — lenders and brokers are required to act in customers' best interests.
- CONC 4.5 (Consumer Credit sourcebook) — specific FCA rules that, even before the 2021 ban, imposed disclosure obligations on credit brokers.
- The Johnson v FirstRand [2025] UKSC 33 ruling — the Supreme Court confirmed that a failure to disclose a secret commission can amount to a breach of fiduciary duty, entitling customers to full disgorgement of the commission paid, not merely damages.
What Does [2025] UKSC 33 Mean in Practice?
The October 2024 Court of Appeal ruling in Johnson v FirstRand Bank (which became FirstRand Bank v Rochez and others on Supreme Court appeal, decided January 2025 as [2025] UKSC 33) is arguably the most consequential consumer finance ruling in a generation.
The Supreme Court upheld the principle that a car dealer acts as a credit broker and thereby owes the customer a fiduciary-like duty not to receive secret commissions from the lender. Where that duty is breached, the customer is entitled to:
- Rescission of the agreement (cancellation), or
- Disgorgement of the commission — that is, full repayment of the secret payment plus any additional interest the customer paid as a result of the inflated rate.
This is materially more generous than the FOS (Financial Ombudsman Service) approach that was in place before October 2024, which had allowed some lenders to argue that partial disclosure or low-value commissions did not trigger the full disgorgement remedy.
The FCA is now consulting on a formal redress scheme under CP25/27, published in early 2025.
Who Can Make a PCP Claim?
You are likely eligible if:
- You took out a PCP or HP car finance agreement between 6 April 2007 and 27 January 2021
- The finance was arranged through a car dealership (as opposed to directly from a bank)
- The agreement was with a mainstream lender such as Black Horse, Santander, Close Brothers, MotoNovo, BMW Financial Services, Volkswagen Financial Services, or similar
- You were a UK consumer (not a business) at the time
You do not need to have kept the car, or even to have the original paperwork. Lenders are required to retain records and respond to Subject Access Requests (SARs) under UK GDPR.
How Much Could You Get?
The FCA's analysis puts average compensation at around £700 per affected contract, but individual amounts vary significantly based on:
- The size of the commission paid
- The interest rate differential (how much above the minimum rate the dealer set)
- The total amount of credit advanced
- The term of the agreement
Total industry liability is estimated at £8.2 billion, though some analyst projections run considerably higher once legal costs and restitution interest are added. The eight major lenders (Lloyds Banking Group via Black Horse, Santander UK, Close Brothers, FirstRand, MotoNovo, BMW, Volkswagen, and Honda Finance) have collectively set aside several billion pounds in provisions.
How Do You Make a Claim?
The process typically runs as follows:
- Identify your agreements — search your records or email inboxes for any car finance correspondence from April 2007 to January 2021.
- Submit a complaint to the lender — you can do this yourself or through a regulated claims management company (CMC) or solicitor.
- Lender investigation — under the FCA's current pause on complaint handling (extended to at least December 2025 under CP25/27 consultation), most lenders are not responding substantively.
- FOS escalation or court proceedings — once the pause lifts, unresolved complaints go to the Financial Ombudsman or court.
- Compensation payment — if upheld, the lender pays compensation, typically by cheque or bank transfer.
Do You Need a Claims Management Company?
You do not legally need a CMC to make a PCP claim. You can submit a complaint directly to your lender at no cost. However, a regulated CMC or specialist solicitor can add value by:
- Identifying all relevant agreements (you may have had more than one)
- Drafting the complaint in a way that maximises the legal basis for redress
- Managing the FOS escalation process
- Representing you if court proceedings are necessary
CMCs are regulated by the FCA under CMCOB (Claims Management Companies: Conduct of Business) rules and are subject to a fee cap. Always verify that any CMC you use is FCA-authorised before sharing personal data.
Key Dates to Know
| Date | Event |
|---|---|
| 6 April 2007 | Earliest date from which claims can be brought (FOS time limits) |
| 28 January 2021 | FCA ban on discretionary commission arrangements takes effect |
| October 2024 | Court of Appeal ruling in Johnson v FirstRand |
| January 2025 | Supreme Court confirms [2025] UKSC 33 |
| Q2 2025 | FCA publishes consultation CP25/27 on redress scheme |
| December 2025 | FCA complaint handling pause currently extended to |
| 2026 | Expected commencement of formal FCA redress scheme |
Common Misconceptions
"I already finished paying my PCP — it's too late."
Not true. You can claim on agreements that have already been fully repaid.
"I handed the car back, so I can't claim."
Incorrect. The mis-selling relates to the commission arrangement at the point of sale, regardless of what happened at the end of the agreement.
"I knew the dealer got a commission."
This is the critical question. General awareness that dealers earn money is different from knowing that the dealer had discretionary control over your interest rate and was financially incentivised to set it as high as possible. The Supreme Court was clear that the latter constitutes a breach of duty.
"My lender says I'm not eligible."
Lenders have a financial interest in minimising liability. An independent complaint assessment from the FOS or a specialist solicitor may reach a different conclusion.
Conclusion
The PCP claims scandal is one of the largest consumer finance mis-selling events in UK history. With an estimated 14.2 million affected contracts and £8.2 billion in potential compensation, the scale dwarfs even the PPI redress exercise. If you financed a car through a dealership between 2007 and 2021, taking the time to check your eligibility could result in a meaningful refund.
For a no-obligation eligibility check, visit MotorRedress today.
This article is for educational purposes only. Compensation amounts vary. Eligibility criteria apply.
Originally published on MotorRedress
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