Mercedes Finance Scandal Explained: Check If You’re Owed a Refund

Mercedes Benz is popular as a luxury brand in the car industry and in the UK, its financing counterpart – Mercedes Finance is also recognised for its wide range of financial products and services which are tailored for businesses and individuals seeking to own a Mercedes-Benz vehicle. Among its financial offerings are Personal Contract Purchase (PCP) and Hire Purchase (HP) which can both provide flexible solutions to customers with different financial preferences and needs. While the company’s reputation is built on providing flexible and tailored financial solutions, that aligns itself with the premium nature of its brand, it’s no exemption to the dealerships and lenders under scrutiny brought about by the ongoing car finance refund claims and mis-selling scandal in the UK. 

If you are driving a Mercedes-Benz vehicle and acquired it either via PCP or HP through Mercedes Finance between April 2007 and January 2021,, then you may want to review your agreement, as there’s a likelihood you’ve been mis-sold. Many dealers and lenders in the UK have recently been found guilty of mis-selling and unfair practices, and in line with the recent investigations, it was uncovered that amongst these mis-sold cases are Mercedes-Benz finance agreements. 

Like most car finance lending companies which were investigated brought about by their mis-selling practices, Mercedes also included discretionary commission arrangements in its contracts, causing overpayment on the end of their customers. 

With this, thousands of Mercedes-Benz customers have started filing Mercedes Benz finance PCP claim and HP claim to recover what they lost, caused by these unfair agreements. Here are the things you need to know about your rights in filing a Mercedes commission claim. 

The Role of Discretionary Commissions in Mercedes Finance: How Interest Rates Were Inflated

Mercedes Discretionary Commission Arrangements (DCAs) is the culprit to most Mercedes car finance claims, and it’s a practice that has been frowned upon by authorities and regulatory bodies brought about by its exploitative nature. Here, dealerships and brokers were allowed to manipulate interest rates on their finance agreements solely for their financial gains. What condemns this practice even more is customers are made unaware of these interest rates, and how it is operated or structured, as to allow the dealer to increase the commission based on how much they see fit. 

Through this financing model, dealers are able to benefit, at the expense of buyers. 

Here’s how the Mercedes Benz Finance Discretionary Commission worked:

1) Dealership Control over Interest Rates

Rather than a fixed interest rate, which is based on objective factors such as credit score or market conditions, Mercedes-Benz Finance gives dealerships the avenue to set their own interest rates, allowing them the flexibility to decide what interest rate to charge customers. 

2) Dealer Commissions are tied to interest rate markups

While dealers enjoyed this pricing structure, the key issue here is that dealers too are incentivised to push higher interest, so it would also pull their commissions upward. Given dealers are allowed to mark up on rates, it creates a conflict of interest,and rather than give buyers the best possible deal, they end up prioritising their financial gains instead, putting malice on the transaction’s credibility. 

3) Lack of transparency for customers

Customers had their full trust with their dealers to do the right thing in their jobs, believing they were offered a fair interest rate, that is based on the prevailing market conditions and their creditworthiness. However, the truth is dealers manipulate the interest rate to inflate the commissions they receive, without buyers knowing. This ends up with customers having to pay significantly more than necessary. 

4) The Financial impact this brings on Customers

Brought about by the lack of transparency, thousands of customers are left paying more than what their car loans are priced at the beginning of the agreement. While there are cases where only a small markup was added, given the course of the loan term, this could still translate to thousands of unnecessary extra pounds. 

Let’s take this example:

• If a fair rate for a car loan is priced at 5%, but your dealer inflated it to 9%, then the difference in the monthly payments can still be significant over a multi-year loan. Now imagine what that could mean for a five-year finance agreement. 

5) Regulatory Scrutiny and Consumer Backlash

During the time these mis-sold agreements were brought to light, it suddenly sparked this public outcry which also sparked regulatory scrutiny. When customers discovered they were overcharged, and misled, consumer protection agencies then began to investigate if these financing practices they were a part of, were deceptive or unfair instead. With this, there have been even greater calls for transparency to surface in the car financing industry, and for stricter regulations on dealer commission structures to be upheld. Potential Mercedes finance compensation for affected customers were also reiterated. 

FCA's Investigation into Discretionary Commission Arrangements

The FCA launched a comprehensive investigation in 2024 that reiterated the use of DCAs within the car finance sector, and how much these arrangements have put customers into a vulnerable financial stage. These arrangements are mainly frowned upon because it permits car dealers and brokers to set their interest rates on finance agreements, leading to higher commissions for themselves, with customers at the expense. With this practice, many customers are forced to pay excessive interest rates on their car loans. 

This investigation is industry wide, and the repercussions aren’t limited to a single group. No matter who your dealership was, if you purchased a car finance agreement, then you must check your eligibility for a claim. The wide-spread issue of mis-selling also prompted lenders to set aside financial provisions to cover refunds and compensations that will be issued. 

Here’s a quick timeline:

• October 2024: As a response to the ongoing mis-selling complaints and scandals, the UK Court of Appeal ruled that receiving commissions from lenders is unlawful, especially if you received it without obtaining consent from the customer. This was the landmark decision that paved the way for potential compensation claims, with estimates to suggest that lenders could face multi-million payouts, roughly around £30 billion.
• January 2025: Close Brothers reportedly put out  £165 million to address potential car finance compensation claims that are related to the scandal. Hence prior to this, they also experienced a £103.8 million loss for the six months leading up to January 2025, as a result of the provision they allocated. 
• April 2025: Should widespread misconduct be confirmed, it may cause an industry-side redress scheme to ensure that all affected consumers will receive the compensation they deserve. The Supreme Court has scheduled a hearing in April 2025, which will then create a huge influence on the outcome expected from the case. 
• December 2025: Complaints on mis-sold car finance agreements, including your Mercedes claim are advised to be filed until December 4, 2025, as it is the deadline for consumers. This was already an extension given by the FCA, hence affected individuals are encouraged to seek assistance until then to ensure they get refunded. 
  

How to Spot If You Were Mis-Sold a Car Finance Agreement

Discretionary Commission Arrangements (DCAs) are being investigated in the UK brought about by the numerous mis-selling practices that have unfairly affected consumers. Many consumers discovered they were mis-sold car finance agreements. If you too suspect you may have been mis-sold a deal, then here are warning signs to look out for. 

1. Your Interest Rate Was Higher Than Expected

A mis-sold deal usually gets caught after buyers find out the interest rate they have been charged was ultimately higher than expected or significantly above the usual interest rate charged on similar cases. This is brought about by the malice which a discretionary commission arrangement doesn’t reveal until it is figured out. Since dealers were allowed to increase the interest rates, this meant being encouraged to put out higher interest rates beyond the lender’s base rate, as the higher the interest rate is, the more commission they’ll get afterwards. 

On the other hand, customers usually assume the interest rate they get is based on their creditworthiness, so if you have a good credit score, and were charged a high interest rate, then this could immediately be considered a red flag., as there’s a high chance dealers maximised profits from it.

How to check

To check whether you were given a higher interest rate, you can compare it amongst the market averages from when you took the loan, or you could also check other customers who had the same deal. 

2. You Were Not Told About Dealer Commissions

Dealer commissions were prevalent as it is something that has been a common practice amongst car dealerships in the UK. However, this has an unfair scheme that puts customers at a disadvantage. Commissions should be mentioned to customers, or else it may result to a mis-sold deal. This is because commissions can put bias to how a deal is priced, leading to an unfair practice for consumers. Buyers aren’t aware these commissions are existent. 

How to check:

Look at your finance contract, and check if there’s any mention of commission. Should you find one, review it carefully again to see if you were priorly informed of it, and if you have proof that you weren’t aware there was any commission. 

3. You Thought the Interest Rate Was Set by the Lender

Most buyers believe the interest rate was according to their risk factors like loan size, market conditions and creditworthiness, but the truth is, it was manipulated depending on the financial benefit the dealers wanted to receive. If you’ve been sold a car finance agreement, then you may want to ask how your commission was calculated. 

How to check:

Ask your dealer if there’s any possibility of adjusting interest rate, and if they say no, then it’s a sign you were being misled, as deals from before 2021, can be adjusted by the dealer themselves. Also check if your agreement mentions who has the authority to determine the interest rate. Was it the lender, or the dealer? 

• If the dealer didn’t explain that they could adjust the interest rate, you might have been misled.
• Check if your agreement states the lender, not the dealer, determined the rate.

4. You Were Pressured Into a Finance Deal

In an intentional mis-selling, dealers often push customers to sign quickly even when they haven’t explained the full terms yet. This is to ensure they get a sale from the rushed deal. Another tactic often used is not giving other finance options to customers, making them think that this is the only available deal for them, even if it’s costly. 

How to check:

Try to remember the moment from when you were offered the deal. Were you rushed, or at least given enough options to choose from? Know that there are always other multiple financing options, and it will have its risks, but if presented well, you would be able to decide whether it’s something that will work for you or not, especially after considering what lies in the whole picture. 

5. Your Agreement Included Unnecessary Extras

Some finance deals include hidden fees which are often unnecessary and go unnoticed. It can be named or covered as GAP insurance, extended warranties, and Payment Protection Insurance. But what many buyers don’t realise immediately is that often these extras aren’t actually needed. If your agreement contains a lot of extras like what we’ve stated above, then you may have been mis-sold an agreement. 

How to check:

In your PCP or HP contract, were all charges explained clearly? In terms of the additional charges, were these mentioned ahead of time? In case you did not agree or request any of these extras, then you might want to mention this to your dealer, to have it removed, or else it could be a form of mis-selling which you can make a Mercedes Finance PCP claim or HP compensation out of.

6. You Paid More Than Expected Over Time

The initial reason why you wanted a car finance agreement in the first place, is to have a cost effective option of car acquisition, so technically, you want to save rather than spend. But if you end up with a mis-sold agreement, then you’ll be paying more than your expected cost. Unnecessary fees and costs can make your total repayment amount much higher than originally anticipated. This happens a lot due to misrepresentation which dealers do to make your deal appear cheaper than it should be.

How to check:

To check if there’s any sign of mis-selling brought about by misrepresentation, then calculate the total amount you have paid versus what you initially agreed in your agreement. In case you found a discrepancy, then you may consider this a sign of mis-selling. 

7. You Were Not Given Other Finance Options

You must be able to assess all your options especially on situations that involve money. In any In cases where you’re only given one type of finance deal, this may be because your dealer wants to make you think it’s the only one available, and for someone who wants a car that badly, you may end up just agreeing. But it's important that you are able to compare different lenders and financing methods, because you want this deal to be something that you can actually afford. 

A fair dealership should explain different options such as Personal Contract Purchase (PCP), Hire Purchase (HP), Leasing options and Bank or Credit union loans. 

How to check:

Not being aware or informed of other financing options can jeopardise your decision making process, as it doesn’t give you the entire picture. You’re made to believe otherwise and rather than having to review what deal suits you better in the long run, you’re left agreeing to one which your dealer forces into you. 

How to Review Your Car Finance Contract for Red Flags

Reviewing your Mercedes finance agreement is crucial if you think all of the above scenarios we discussed have happened to you. This is also a proactive step to ensure you weren’t mis-sold a car finance deal. Learning early these signs of mis-sellings, and how to identify these unfair practices puts you at an advantage in filing your claim, and recovering what you were owed. Here are common red flags you should pay attention to:

Lack of Commission Disclosure

One of the requirements which the FCA has set, is to disclose commission payments on car finance deals. This was supported when DCAs were officially banned in all car finance agreements from January 2021. Many contracts still failed to mention commission payments, knowing that it can significantly affect the way they price finance agreements, but the bigger downside here is that it leaves customers unaware that their interest rate may have been increased in exchange for dealer profit. 

The best way to know if commission was not disclosed into your agreement, is to check for terms such as commission, broker fee and introducer fee, as these are the legal names to the terms which should mean commission, in a certain car finance agreement. If there wasn’t any mention of these, then you can contact your lender to request for a written confirmation to know if any commission was paid and how much it costs. Should the lender refuse to disclose this amount, then this can constitute an act of mis-selling. 

Unfair High Interest Rate

Given the premise that dealers are allowed to increase interest rates even beyond the lender’s base rates, this creates malice on a dealer’s intention to give the best possible deal to their customers, or top up the interest rate so it reflects positively on the commission they make. But unfair interest rates means that buyers may be left paying out more than they should have not, brought about by poor credit, but rather because the dealers wanted to make more commission. 

If you have a good credit score, but given an unusually high APR, then this could mean you were being overcharged by your dealer. To know whether the rates were set out to be immensely high, then you should compare it to the average car finance rates available in the market, during the time of your agreement. If your Mercedes finance agreement turns out to be more expensive, then there’s higher likelihood you were mis-sold. Also, ensure you ask for a detailed breakdown from your lender explaining to you how your rate was determined. This allows you to know outright if there’s a likelihood you were mis-sold, as if it’s made by your dealer, then most likely they inflated the interest rate. 

Hidden Fees and Unnecessary Add-ons

There are agreements which include extra products like GAP insurance, service packages and even extended warranties, and while all these can be availed upon, it’s a must that customers understand that these are extra costs and aren’t freebies to the deal. If you did not request for any of these to be added, but ended up paying it, then you were certainly mis-sold. These add-ons can inflate the total cost of your loan which isn’t advisable to those who wanted a cost-effective option in the first place. 

Review your contract carefully and check for additional charges that you weren’t previously aware of. If you see any fee or product which was added, but wasn’t something you agreed during the agreement signing, then this can make you eligible for compensation or refund. These add-ons often inflates the total cost of the loan and if bundled without proper explanation can cause financial difficulties on your end. 

Limited Finance Option

Ethical dealers present you with multiple financing options, and refrain from simply giving you one choice. There are tons of other available options in the car financing industry such as Hire Purchase, Personal Contract Purchase and Leasing or bank loans, which all has its sets of pros and cons depending on your situation and financial capacity. But if your dealers steers you towards a single option, then it may mean they are maximising profits, rather than prioritise what’s best for you as a buyer. Fair deals should be able to allow you to build your own comparisons of the different plans you have and choose what works best for your needs.

Inflated Total Repayment Amount

Your contract price and the total amount you paid should always be identical, or if not, you should be fully aware of the costs added, and why these were topped up to your contract. If the amount was different, then you should ask your dealer why and what additional charges were added. In line with the car financing scandal, there were also a lot of Mercedes customers who found out that the final repayment amount they paid was significantly higher brought about by the hidden charges and unfair terms in their contract. Should you find a large discrepancy, then it's important to check right away, and start filing your Mercedes Finance Claim. Just remember, if the numbers don’t add up, then this could be a sign of mis-selling. 

Common Mis-Selling Scenarios in Mercedes Finance Deals

It’s important to know the common mis-selling scenarios present in the car finance industry so you can avoid it. Many customers who financed a Mercedes vehicle were unknowingly subjected to unfair practices that led them to overpay. Below are some of the most common ways mis-selling occurred in Mercedes finance deals:

Commission Driven Interest Rates

Mercedes customers often realise they’ve been mis-sold only after learning that dealers initially had the discretion to set out the interest rate offered to customers. Rather than provide the best available rate, most dealers chose to inflate the interest rates because it is linked to the commissions and a higher interest rate only means a higher commission for them to enjoy. This simply means that two customers who have the same deal, same car, and same credit profile could receive vastly different rates, depending on the commission the dealer initially wanted to make. 

Warning sign: If your interest rate seemed excessively high compared to market rates at the time, or if your credit score didn’t justify the rate you were given, you may have been mis-sold.

Being Pressured Into a More Expensive Finance Option

Most customers who are now making Mercedes finance claims are often pushed towards their Hire Purchase (HP) and Personal Contract Purchase (PCP) agreements without being given any other financing option which may be more suitable for them, and can offer lower interest rates. What’s worse is that some customers were led to believe that the only way they can get a vehicle is to finance through Mercedes Benz Finance, and that doing so will qualify them for discounts and special offers, when in reality there are cheaper financing options elsewhere. 

Warning sign: If you weren’t informed of different financing options or were pressured into taking a specific deal, this could be a case of mis-selling.

Failure to Explain Balloon Payments in PCP Deals

Personal Contract Purchase (PCP) deals are complicated especially for those people who aren’t well-versed on how this financing option goes. This is the exact reason why many people end up filing claims. Some Mercedes Benz finance customers were not given the clear breakdown on important terms such as balloon payment, which then led to mis-sold deals. Balloon payment can be tricky, and dealers take advantage of this, to trap customers into deals which at the latter, can affect them financially, or require them to pay huge sums for ownership. 

Warning sign: If you weren’t made fully aware of how much you would owe at the end of your agreement, you may have mis-sold your PCP deal.

Adding Extras Without Consent

Some Mercedes customers learned that there were extra fees charged to them, even without their knowledge and explicit approval. These fees vary greatly, from GAP insurance, service packages, and extended warranties, and while they may have benefited from it, adding it on top of their agreements, without consent can constitute to mis-selling. Extra charges like this can inflate the total loan amount, leaving customers at dismay after finding out that they will be paying more than they originally anticipated.

Warning sign: If you notice additional products in your contract that you didn’t agree to or weren’t fully explained to you, this could indicate mis-selling.

Incorrect or Misleading Affordability Checks

Affordability checks are required in every car finance agreement, as it helps the dealer assess correctly whether the customer can afford the deal they are getting, as to avoid approving borrowers or clients who may not be able to pay in the future, and feel uncomfortable in the amount they are paying. But there are many cases where dealers fail to conduct proper and regulatory affordability checks, causing deals that don’t fit the customer’s current financial status. Some customers were even encouraged by dealers to overextend their budget without being able to comfortably assess their risks. 

Warning sign: If you struggled to afford your repayments and weren’t properly assessed for affordability, you might have been mis-sold.

Compensation Calculations Explained: What Factors Determine Your Refund

Customers who were mis-sold a Mercedes finance deal can be entitled to compensation. The amount you receive will vary on factors such as:

Overpaid Interest Due to Inflated Rates

One of the biggest factors in your refund calculation is the extra interest you paid which is brought about by your dealer inflating your rate for commission. If your interest rate was artificially increased beyond the lender’s base rate, you could be refunded the difference. If the lender’s base rate was 5%, but the dealer raised it to 9%, you may be eligible to recover the extra 4% you paid over the term of the loan.

Undisclosed Commission Refund

If a commission was added on top of your deal, without your knowledge, you may be entitled to claim back the commission amount plus the interest that was added. Say a dealer received a £2,000 commission for arranging your finances but never disclosed it. You may be refunded this amount along with compensatory interest.

Hidden Fees and Extra Charges

There are finance agreements which were dubbed mis-sold because it included fees and charges which wasn’t explained to you in the beginning. So if your agreement included an undisclosed £500 admin fee, or GAP insurance, without your approval, then you may be eligible to get this amount refunded.

Compensatory Interest (Statutory 8% Interest)

Apart from refunding the overpaid amount, a compensation claim can also include the statutory interest at 8% per year on the money you overpaid. This ensures that customers are compensated for the time they were unfairly out of pocket. So if you overpaid a total of £3,000 in total and your case takes two years to resolve, you may receive an additional £480 (8% of £3,000 per year) in interest.

Filing Your Mercedes Benz Finance Claim: A Step-by-Step Guide

Anyone who was mis-sold a Mercedes PCP and HP finance deal has the right to file a Mercedes PCP  claim for compensation. This process can be tedious but given the right information, you’ll definitely feel more confident all throughout, while increasing your chances of success. 

1. Gather Your Finance Agreement Details

When starting a Finance claim, the first step you have to take is to collect all the essential documents that are related to your car finance deal. This helps you in establishing whether you really were mis-sold, while providing evidence that can support your case. Here’s a list of the essential documents you need to compile and keep in handy:

• Finance Agreement
• Bank Statement and Payment Records
• Correspondence with the dealer or the lender.
• Credit Reports

If you find it difficult to find all your copies of the following documents, you can request a copy from your dealer or lender, which in this case is Mercedes-Benz Finance. They are the people legally required to provide you with this specific information.

2. Check for Signs of Mis-Selling

After you have gathered all the relevant documents needed, then it’s time to investigate and check any sign of mis-selling. Just ensure that you’ll carefully review your agreement to carefully assess what type of mis-selling occurred, so you can also gauge the amount of compensation you will receive. 

3. Submit a Formal Complaint to Mercedes-Benz Finance

The next step to identifying the signs of mis-selling, is to file a formal complaint with Mercedes-Benz Finance which can be done via email, on a phone call, or through writing.

When making your complaint letter, always include the following details to ensure you submit a complete claims letter.

• Name with Contact Details and the Agreement Reference Number
• A clear explanation of why you believe you were mis-sold your finance deal.
• All the details of the payment you’ve made, and how much you paid in extra brought about by inflated interest rates, and hidden fees
• A request that clearly indicates the amount of compensation you want to receive.

Always keep a complete record of all the communication you had with Mercedes-Benz Finance.

4. Escalate to the Financial Ombudsman Service (FOS)

Should you receive a rejection letter from the Mercedes-Benz finance complaint you submitted, then the next step you can take is to escalate to the Financial Ombudsman Service (FOS). The FOS is an independent body that’s responsible for resolving the common disputes that arise between consumers and financial institutions. They also have the authority to order Mercedes-Benz Finance to compensate you should they find any evidence of wrongdoing. 

5. Consider Legal Action or Claims Management Companies

In case, the FCA investigation led to a wider industry payout, then it means additional legal avenues to claim your compensation. Getting a solicitor or claims management company can help you if you want a professional filing your claim, but you might want to check on the fees they charge to ensure you pay a reasonable and decent amount of professional fee. Hence there are also claims management companies that charge fees based on a no win-no fee basis. 

You can also join collective claims if you feel more confident with class action lawsuits, having more support with other claimants on your side as well. 

Case Study Focus: Example of a successful Mercedes refund

To make you feel more confident in making a claim against Mercedes-Benz Finance, here’s an example of successful Mercedes refund decisions that were upheld. 

1. Ref: DRN8246997 

Mr B acquired a car under a Hire Purchase (HP) agreement, which he signed in October 2014. Later on, he complained about the annual mileage and guaranteed future value under his hire purchase agreement with Mercedes-Benz Financial Services UK Limited. He argued that the annual mileage should have been 15,000 miles and that the guaranteed future value was unrealistic. Mercedes Benz then offered to pay £100 compensation to Mr B.

2. Ref: DRN-2385325

Mr Y took a car on a three-year hire purchase agreement from Mercedes-Benz Finance Service (MBFS) on December 2016. In the agreement, Mr. Y was supposed to return the car in good condition, and it also included having to pay for excess mileage. Later on, MBFS sent Mr Y an invoice for nearly £2,500 for cleaning fee, including over £600 for excess mileage. Mr. Y then made a complaint to the FOS, as he did not believe he had been treated fairly. After a thorough review of the case, FOS demanded Mercedes-Benz to refund the cleaning charges.

3. DRN-1948782

Ms B entered into a hire purchase agreement with MBFS to fund the acquisition of a new car costing £26,071.40 on 28 September 2019. She then paid a deposit of £8,000, from where she agreed to make 48 monthly payments of £420.69, after which she could pay a small fee of £10 to fully own the car. However, she then complained that the agreement she acquired was misrepresented to her. In the end, the HP agreement was cancelled, and Ms. B was refunded 10% of all the monthly payments she has, including the deposit and 8% annual simple interest, and remove the agreement from Ms. B’s credit file. MBFS is also required to refund any other costs associated with cancelling the agreement, including the one that has relevance to insurance. 

Conclusion

If you’ve been misrepresented or were mis-sold an agreement by Mercedes-Benz Finance, then you should start your claims process immediately to ensure higher chances of winning your claim. You can also consider tapping experts and claim management companies to help you in arranging your claim, as filing a complaint against the Mercedes-Benz Finance service can be intimidating for most.