Is PCP the new PPI?

The ‘Car Loan’ market in the UK is estimated at £75bn, with over 6.5 million vehicles having been financed through leasing deals. Circa 9 out of 10 of the 2.3m new cars sold in a typical year in Britain are paid for by using some sort of financing agreement, with PCP – Personal Contract Plans being one of the most common purchase methods. The PCP model is structured by the buyer putting down a deposit and then ‘renting’ the vehicle over a period of time at a monthly cost.


Have consumers been mis-sold?

Extensive research into the motor finance sector found that discretionary commission models and Undisclosed Commissions had the potential to be causing consumer detriment, where the commission that the finance broker received was linked to the interest rate that consumers paid with the finance broker setting the interest rate for the finance.  In addition, these commissions may have been undisclosed with finance brokers and providers failing to disclose the necessary information associated with PCP arrangements.

The FCA undertook a ‘mystery shopping’ exercise, visiting motor retailers and finance brokers. Commission disclosure occurred at only 11 of the 122 firms reviewed during the exercise.

Some of the main scenarios leading to these Undisclosed Commissions were:

  • The car salesperson/finance broker did not explain they would receive a commission on the car finance arrangement.
  • The finance provider did not disclose that a commission was payable in relation to the car finance arrangement.
  • The car salesperson/broker did not explain the terms and conditions in relation to the finance arrangement/PCP.


What is the stance of the FCA?

In July 2020, the FCA announced they would introduce a ban on discretionary commission models, this was implemented in January 2021. The changes which have been applied across all credit sectors, not just motor finance, are set to see a significant reduction on consumers’ financing costs.


Christopher Woolard, the FCA’s Interim Chief Executive, said:

‘By banning this type of commission, where brokers are rewarded for charging consumers higher rates, we will increase competition and protect consumers.

‘We estimate that consumers could save £165 million because of today’s action.

The FCA will also make changes to the way in which customers are told about the commission they are paying to ensure that they receive more relevant information.’


These disclosure changes apply to many types of credit brokers and not just those selling motor finance. These changes will also come into force on 28 January 2021.


What does this mean for PCPs entered into before 28th January 2021?

The findings from the FCA and the size of the market indicates there are millions of consumers who may be completely unaware that commission was payable, linked to the interest rate charged on the PCP finance arrangement – which may mean that you are already managing PCP Undisclosed Commission claims.


How can Affiniti Finance assist law firms?

If your firm is managing PCP Undisclosed Commission claims, We offer funding to assist your firm in running these types of claims. Our funding models support both regulated consumer credit arrangements and law firm lending, giving you the flexibility dependent on your requirements. Our seamless API integration with your case management system allows you to submit funding requests and draw downs on a broad range of claims. By removing cash flow constraints on your business, our funding enables you to build your book of business and focus on running the claims at hand.


To discuss the funding of PCP Undisclosed Commission claims, or one of the many other claim types we support, contact us directly at and one of our dedicated team will be assigned to help you.


Joanna Burgess

Director of Strategy & Operations

Scroll to Top