Your PCP & HP Claims Guide

This guide was updated in August 2025 to reflect the UK Supreme Court ruling and the latest FCA announcements on PCP and HP car finance claims.

If you took out a Personal Contract Purchase (PCP) or Hire Purchase (HP) agreement between 2007 and 2021, you could be entitled to a refund on money you overpaid. The Financial Conduct Authority (FCA) has found widespread evidence that lenders and brokers charged customers more than they needed to by adding hidden commissions or failing to explain key terms. 

Following the UK Supreme Court ruling in August 2025, many of these agreements will be judged under the legal test of whether the lender created an “unfair relationship” with the customer. At the same time, the FCA is preparing a redress scheme that could result in payouts to millions of drivers from 2026.

This updated guide explains how PCP and HP finance works, why so many agreements were mis-sold, what the recent legal changes mean for you, and how to check whether you could have a valid claim.

Understanding PCP and HP Car Finance

PCP and HP are the two most common car finance options in the UK, but they work in different ways. In a Personal Contract Purchase agreement, you pay a deposit and then lower monthly payments than you would under HP. This is because you are only paying for the depreciation of the car during your term of use, not its full value. At the end of the term, you have the choice to return the car, part-exchange it, or pay a final lump sum, known as the “balloon payment,” to own it outright. That balloon figure is set at the start of the agreement based on the car’s expected value at the end of the term.

In a Hire Purchase agreement, the structure is simpler. You pay a deposit, followed by monthly instalments that cover the full price of the car. When the final payment is made, you automatically become the legal owner of the vehicle. HP usually involves higher monthly payments than PCP because you are paying off the entire cost, but there is no balloon payment at the end.

Summary:

• PCP: Lower monthly payments, pay for depreciation, balloon payment option at the end.
  
• HP: Higher monthly payments, pay full value, own the car automatically at the end.

How Mis-selling Happened

The FCA’s investigation uncovered that around 95% of car finance agreements before 2021 involved some kind of commission being paid to the broker or dealer. In about 40% of those cases, the commission was paid under a discretionary commission arrangement (DCA). These arrangements allowed the dealer to raise your interest rate above the base rate set by the lender, with the extra amount going directly to the dealer as commission. Customers were rarely informed of this, resulting in them paying more in interest than necessary without realising it.

Mis-selling was not limited to DCAs. In some cases, lenders and brokers failed to carry out proper affordability checks to see if customers could manage the repayments. Others used vague or overly complex terms to hide how interest was calculated or when balloon payments would be due. Some customers were told their interest rate was fixed when, in fact, it could be adjusted at the dealer’s discretion.

Summary:

• 95% of agreements involved commission; 40% were under DCA models.
  
• DCAs allowed dealers to raise interest rates to earn more commission.
  
• Mis-selling also involved poor affordability checks and unclear terms.

The 2025 Legal Update

On 1 August 2025, the Supreme Court ruled on a key group of test cases. It decided that most future car finance claims will need to be brought under Section 140A of the Consumer Credit Act,  the “unfair relationship” provisions,  rather than relying on arguments about fiduciary duties or “bribery” that had previously been used in some cases.

In simple terms, this means the focus will now be on whether the overall terms of your agreement, including the size and disclosure of any commission, created an unfair situation between you and the lender. This is a more focused legal route, but one that still allows many claims to go ahead, particularly where commissions were high and not disclosed clearly.

Summary:

• Supreme Court: Claims now under “unfair relationship” rules (Consumer Credit Act, s140A).
  
• Focus is on whether terms and commission created an unfair deal.

The FCA Redress Scheme

In July 2025, shortly before the Supreme Court’s decision, the FCA announced that it would consult on an industry-wide redress scheme. This scheme, expected to be finalised in 2026, could apply to agreements dating back to 2007 and cover both DCA and some non-DCA cases where unfairness can be shown. The FCA estimates that up to 14.6 million agreements could be eligible for compensation, with the total cost to the industry ranging from £9 to £18 billion.

Although these figures sound large, the likely payment for most individual claims is now expected to be up to £700 per agreement. This is lower than the early estimates that circulated in 2024, but the total can add up if you had multiple qualifying agreements. For example, if you financed three cars in the period covered, your total claim could be worth around £2,850.

Summary:

• FCA scheme expected in 2026, covering agreements from 2007–2021.
  
• Up to 14.6m agreements could qualify; payouts up to £700 each.
  
• Multiple agreements could increase your total claim value.

Who Can Claim?

You may be eligible to claim if you signed a PCP or HP agreement between April 2007 and 28 January 2021 that involved a commission payment which was not explained properly. This includes both discretionary commission arrangements and some fixed commission agreements where the amount paid was significant and hidden from you.

Your claim is stronger if your APR was notably higher than typical market rates at the time, or if the lender failed to check whether the repayments were affordable for you. Even if you no longer have your paperwork, your lender can supply a copy, and regulated claims companies can often trace agreements via a free credit check.

Summary:

• Agreement must be from 2007–2021.
  
• Commission must have been undisclosed or unclear.
  
• Higher-than-average APR strengthens your case.

How Much Could You Get Back?

Most claims are expected to result in refunds of up to £700 per agreement, although some may be worth more if the overpayment in interest was particularly high. The refund typically covers the extra interest you paid as a result of the commission, along with associated charges, and may include statutory interest.

Summary:

• Most claims: up to £700 per agreement.
  
• Some may exceed £1,000 depending on overpayment.
  
• Refund includes extra interest, charges, and possibly statutory interest.

How to Check Your Agreement

The first step is to locate your finance agreement and read it carefully. Look for any mention of commission,  especially wording such as “a commission may be paid” without specifying how much. Compare your APR with market averages from the year you signed; if it is significantly higher, that may be a sign that a commission was added.

If you do not have the paperwork, contact your lender or ask a regulated claims management company to help locate your agreements through a credit file check.

Summary:

• Check for vague commission wording in your contract.
  
• Compare APR with historical market averages.
  
• If no paperwork, request it from your lender or via a claims company.

How to Make a Claim

You can complain directly to your lender for free, explaining why you believe the agreement was unfair and including any evidence you have. Normally, lenders have eight weeks to respond, but the FCA has extended this deadline to 4 December 2025 for certain commission-related complaints while its investigation continues.

If the lender rejects your claim or does not respond, you can take the case to the Financial Ombudsman Service for free. 

If you choose not to make the complaint yourself, you may choose to make a PCP Claim through a regulated law firm or a regulated claims management company, who will handle the process for you. They will assess your case, prepare the paperwork, and escalate if needed. Many representatives work on a no win, no fee basis, meaning you only pay a fee if your claim succeeds or if you cancel your agreement outside of any cooling off period. It is important that you check the fees involved prior to signing up with a representative.

Looking Ahead

Understanding and diligently monitoring your car finance agreements are critical to ensuring you do not fall victim to mis-selling practices. By being informed about the terms of your Personal Contract Purchase (PCP) or Hire Purchase (HP) agreements, you can protect yourself from unforeseen financial burdens and take advantage of the benefits these financial products offer.

If you suspect that your car finance agreement was mis-sold, it’s crucial to take action. The first step is to review your agreement and gather any evidence of mis-selling. Then, proceed with filing a formal complaint with your finance provider. If necessary, escalate your complaint to the Financial Ombudsman Service or seek legal advice to pursue further action. Claims management companies can also provide assistance, though it’s important to choose one that is reputable and regulated.

Staying informed about future regulatory changes is also essential. Regulatory bodies like the Financial Conduct Authority (FCA) continuously update their guidelines and take action to protect consumers. By keeping up-to-date with these changes, you can ensure that your rights are always protected.

Additional Resources

• FCA Publications: Visit the Financial Conduct Authority’s website for the latest publications and updates on car finance regulations.
• Consumer Advice: Websites such as Money Advice Service and Citizens Advice offer extensive guides and advice on managing car finance.
• Legal and Financial Advice: For professional guidance, contact the Law Society to find a solicitor who specialises in consumer finance law, or check the Financial Ombudsman Service for assistance with disputes.