What is the FCA car finance investigation?

The FCA car finance investigation examined how car finance agreements were sold in the UK, focusing on commission models, interest rate discretion, and whether consumers were treated fairly.

Why did the FCA investigate car finance?

The FCA identified concerns that certain commission models created conflicts of interest, allowing dealers to earn more by charging higher interest rates without clear disclosure to customers.

Did the FCA say all car finance agreements were mis-sold?

No. The FCA did not state that all agreements were mis-sold. The investigation highlighted structural risks and consumer harm, but each agreement must be assessed on its own facts.

When were Discretionary Commission Models banned?

Discretionary Commission Models were banned by the FCA from January 2021 due to concerns about fairness and transparency.

Does the FCA investigation mean I am entitled to compensation?

No. The investigation does not guarantee compensation. It provides regulatory context, but outcomes depend on how an individual agreement was sold.

FCA Car Finance Investigation Explained | What Happened and Why It Matters

The Financial Conduct Authority (FCA) investigated the UK car finance market after identifying concerns about how some agreements were sold. This page explains what the investigation was about, what the FCA found, and why it matters for consumers.

Who is the FCA and why it matters

The Financial Conduct Authority (FCA) is the UK regulator for consumer credit. Its role is to ensure firms treat customers fairly, communicate transparently, and avoid conflicts of interest.

When the FCA identifies a market-wide risk of consumer harm, it can investigate, issue guidance, or impose regulatory changes.

What triggered the car finance investigation

The FCA became concerned that certain commission arrangements in car finance created conflicts of interest. In some cases, dealers could earn more by increasing the interest rate charged to customers.

Customers were often unaware that interest rates were discretionary or that commission incentives existed.

What the FCA found

The investigation found that Discretionary Commission Models (DCMs) posed a significant risk of consumer harm. They incentivised dealers to prioritise commission over customer outcomes.

The FCA concluded that these models undermined transparency and informed consent.

The 2021 ban on Discretionary Commission Models

As a result of the investigation, the FCA banned Discretionary Commission Models from January 2021. This removed dealers’ ability to earn more by increasing interest rates.

The ban addressed future sales but did not automatically resolve concerns about agreements sold before 2021.

What the investigation does and does not mean

The FCA investigation does not mean that all car finance agreements were mis-sold. It highlights structural issues and explains why certain sales practices are now under scrutiny.

Each agreement must be assessed individually, based on what the customer was told and how the agreement was presented.

Why the FCA investigation matters to consumers

The investigation provides important context for understanding why complaints have increased and why lenders are now reviewing past agreements.

It also explains why transparency, commission disclosure and interest rate setting are central to many car finance mis-selling cases.

Next step: How to complain about car finance mis-selling →