Car Finance Disputes

Overview

Car finance disputes cover a range of issues including PCP and HP mis-selling, undisclosed dealer commission, and your rights when a financed vehicle is faulty. The UK car finance sector has come under intense regulatory scrutiny, with the FCA investigating widespread commission non-disclosure practices.

Key Legislation

Consumer Credit Act 1974 - Governs all regulated credit agreements, including hire purchase (HP) and personal contract purchase (PCP)

Consumer Rights Act 2015, Part 1 - Your rights when goods (including cars) are faulty

Financial Services and Markets Act 2000, Section 19 - Requirement for firms to be authorised

FCA CONC sourcebook - Rules on responsible lending, affordability, and disclosure

Common Grounds for Dispute

1. Undisclosed Commission (Discretionary Commission Arrangements)

Before January 2021, many dealers could set the interest rate on your finance and earn a higher commission the more interest you paid. Under FCA Principle 7 (communications) and CONC 4.5, this commission must be disclosed. If it was not, you may have a claim for the difference.

2. Affordability Failures

Under CONC 5.2A, the lender must carry out a reasonable and proportionate affordability assessment before entering the agreement. If they lent irresponsibly (for example, ignoring existing debts or low income), the agreement may be deemed unfair.

3. Faulty Vehicle on Finance

If the car is faulty, you have rights under the Consumer Rights Act 2015:

Section 9 - Goods must be of satisfactory quality

Section 10 - Goods must be fit for a particular purpose

Section 11 - Goods must match their description

Under HP/PCP, the finance company is the legal owner and supplier, making them liable for faults under Section 75 of the Consumer Credit Act 1974

4. Misrepresentation of the Vehicle

If the dealer made false statements about the car's history, mileage, or condition, you may claim under the Misrepresentation Act 1967 or the Consumer Protection from Unfair Trading Regulations 2008, Regulation 5.

Step-by-Step: How to Dispute

Step 1: Gather Your Documents

The finance agreement (check the APR, total amount payable, and any commission disclosure)

Vehicle advertisement or listing at point of sale

Any pre-sale correspondence or representations

Service history and MOT records

Independent inspection report if the car is faulty

Step 2: Complain to the Finance Company

Write a formal complaint setting out:

Your agreement reference number

The specific grounds (e.g., undisclosed commission, affordability, fault)

The relevant legislation or regulation breached

The remedy you seek (e.g., return of excess interest, rejection of vehicle)

Step 3: Allow 8 Weeks for a Final Response

The lender must respond within 8 weeks under FCA DISP rules.

Step 4: Escalate to the Financial Ombudsman Service

If you receive an unsatisfactory final response (or no response within 8 weeks), refer to the FOS. They can award up to £415,000.

Step 5: Consider Court if Necessary

For claims above FOS limits or where you disagree with the FOS outcome, you can pursue the matter through the County Court.

Key Points

Voluntary Termination (VT): Under Section 99 of the Consumer Credit Act 1974, you can hand back a financed car once you have paid at least half the total amount payable. The car must be in reasonable condition.

Right to Withdraw: Under Section 66A, you have a 14-day cooling-off period from the date of the agreement.

Statute-barred claims: The limitation period is generally 6 years from the date of the agreement (Limitation Act 1980, Section 5), or 6 years from when you could reasonably have known about the issue (Section 32 for deliberate concealment).

EvenStance Can Help

EvenStance can analyse your car finance agreement, identify if commission was likely undisclosed, generate your complaint letter to the lender, and guide you through the FOS escalation process step by step.