What Is Financial Mis-Selling?

Financial mis-selling happens when a regulated firm sells you a financial product without giving you the honest, clear information you needed to decide whether it suited you. UK financial regulation requires firms to communicate honestly, assess whether a product suits you, and act with integrity. When firms fail to do this, and you lose out as a result, you may have grounds for compensation.

Mis-selling can affect many types of product, including car finance, payment protection insurance, pensions, and investment advice. This guide focuses mainly on car finance, currently the largest and most active area of mis-selling claims in the UK, while explaining the wider legal principles that apply across financial mis-selling generally.

The Car Finance Commission Issue

Estimated, based on regulatory and industry reporting: the Financial Conduct Authority investigated commission arrangements on motor finance agreements after concerns that some lenders and dealers were not being transparent about how commission affected the deal they offered customers. This issue may affect a large proportion of car finance agreements taken out over roughly two decades, up to early 2024. If you took out car finance and nobody told you how commission worked, or if the commission structure gave the dealer an incentive to charge you a higher interest rate, you may have grounds to claim.

Because this is a live regulatory area, the exact rules, deadlines, and redress scheme details can change. Always check the current position on GOV.UK or with the Financial Conduct Authority before relying on any specific figure or date.

Signs You May Have Been Mis-Sold Car Finance

• Nobody told you that the dealer would receive a commission from the lender.
• Nobody explained how that commission was calculated, or whether it depended on the interest rate you were charged.
• You felt rushed through the paperwork, or the finance details were glossed over.
• Your monthly payments felt higher than you expected for a similar deal elsewhere.
• Looking back, you are not confident you understood what you were signing at the time.

Mis-selling is rarely one dramatic moment. It is often a quiet mismatch between what a firm should have explained and what it actually explained.

How to Make a Complaint Yourself

You do not need a claims management company to complain about mis-selling. You can handle the process yourself, at no cost, in three main stages.

1. Complain to the lender or firm directly

Set out clearly what you believe went wrong and why. Include your agreement details and any documents you still have.

2. Escalate to the Financial Ombudsman Service

If the firm rejects your complaint, or does not resolve it satisfactorily, you can take it to the Financial Ombudsman Service free of charge. Time limits apply, usually six months from the firm’s final response, so act promptly once you receive it.

3. Financial Services Compensation Scheme

If the firm involved has since gone out of business, you may be able to claim through the Financial Services Compensation Scheme instead.

Should You Use a Claims Management Company?

Claims management companies can handle the process for you, but they typically take a percentage of any compensation you receive, sometimes a substantial one. Since the complaint process itself is free and reasonably straightforward to do yourself, many people complain directly first, and only turn to a claims company or solicitor if their case is complex or the firm is being difficult.

What Compensation Might Cover

If a mis-selling claim succeeds, compensation aims to put you back in the financial position you would have been in if you had received honest information from the start. Depending on your case, this might include a refund of some interest paid, or a payment that reflects the difference the commission made to your rate. Every case differs, and nobody can guarantee an outcome in advance.

Beyond Car Finance: Other Common Mis-Selling Claims

• Pensions, particularly where an adviser recommended a pension transfer or opt-out without a clear, suitable reason.
• Packaged bank accounts, where the bank charged you for extra features you did not need or want.
• Payment protection insurance, though most legitimate PPI claims are now historic due to past complaint deadlines.
• Investment advice, where the product did not suit your risk appetite or financial goals.

The same core legal principles apply across all of these: did the product suit you, was the advice honest, and did you receive the information you needed to make an informed choice.

Frequently Asked Questions

How do I know if I was mis-sold car finance?

Start by requesting your finance agreement documents from the lender or dealer. Look for any mention of commission, and consider whether anyone told you about it and how it worked at the time.

Is there a deadline for making a claim?

Time limits apply, and they can change as regulation develops in this area. Check the current deadlines on GOV.UK or with the Financial Ombudsman Service before assuming you have missed your chance.

Do I need a solicitor to make a mis-selling claim?

Not necessarily. Many people complain directly to the firm and, if needed, the Financial Ombudsman Service, without paying anyone. A solicitor may be worth involving if your case is complex or high value.

What if the lender has gone out of business?

You may still be able to claim through the Financial Services Compensation Scheme, which exists for situations exactly like this.

Getting Legal Advice

If your situation is complicated, or a firm refuses to engage properly with your complaint, it may be worth speaking to a solicitor. Read our guide to choosing the right legal service, or our wider explainer on financial law for how consumer protection fits into the broader regulatory picture.

This article gives general information only. It does not constitute legal or financial advice. Details of the car finance redress scheme, deadlines, and eligible date ranges are estimated and subject to change, since this remains a live regulatory matter. Always check current guidance from GOV.UK, the Financial Conduct Authority, or the Financial Ombudsman Service, and speak to a qualified adviser about your specific case.