PPI Claims vs Car Finance Claims: What’s the Difference?
Guide 5 September 2025 |  | Shannon Smith O'Connell |
Updated: 05 September 2025
Originally Published: 12 December 2024
PPI claims and car finance claims both deal with situations where financial products were sold unfairly in the UK, but the details are quite different. PPI claims focus on insurance policies that were added to loans or credit agreements without the customer’s proper consent or understanding. Car finance claims, on the other hand, are often about hidden broker commissions and inflated interest rates [1] that left people paying more than they should have. These practices are at the heart of what has become known as the car finance scandal.
In both cases, the Financial Ombudsman Service (FOS) has dealt with huge numbers of complaints from people who feel they were not given the full picture when they signed their agreements. With updates on the car finance scandal expected to shape how future cases are handled, now is a good time to understand the differences between the two types of claims.
Understanding PPI Claims
The purpose of Payment Protection Insurance (PPI) is to provide protection for loan, mortgage or credit card repayments if you were not able to do the job due to illness, accident or unemployment. It sounded like a safety net on paper. It turned out to be one of the biggest financial scandals in the UK.
PPI was often mis-sold in several ways:
- It was added to credit agreements without the customer’s knowledge.
- People were told it was a condition for loan or credit card approval.
- It was sold to customers who could not benefit from it, such as those with pre-existing conditions or in excluded professions.
The scale of mis-selling was huge. Many customers later discovered that more than half of the policy cost was taken as commission without them being told. The FOS ruled that this lack of transparency meant they were entitled to refunds [2].
The claim deadline for PPI was August 2019. Before that date, more than £38 billion was refunded to consumers [3]. Although it is no longer possible to make a PPI claim, the lessons learned are now influencing how other large-scale mis-selling cases, such as car finance, are handled.
Understanding Car Finance Claims
Car finance, through Hire Purchase (HP) and Personal Contract Purchase (PCP), is a popular way to spread the cost of a car. But between 2007 and 2021, many agreements were arranged under a Discretionary Commission Arrangement (DCA). This gave brokers the ability to raise the interest rate you paid, so they could earn more commission, without telling you.
In 2021 the Financial Conduct Authority (FCA) banned these arrangements because they encouraged dealers to prioritise their own earnings over the customer’s best interest [4]. This opened the door for claims from customers who believe they were overcharged.
Car finance can be mis-sold in different ways:
- The dealer or broker did not tell you they were earning a commission.
- They mentioned a commission but did not say how much it was.
- The commission was so high that it made the finance far more expensive than it needed to be.
If your finance agreement was signed between 2007-2021, you might be able to claim a refund of the commission and any interest incurred as a result. There is no set claim deadline at present. The Supreme Court issued its ruling on 1 August 2025, which is now shaping how these cases will be handled. The FCA is reviewing the decision and is expected to publish detailed guidance later in the year. In the meantime, most lender replies to car finance complaints remain paused until 4 December 2025, so acting now ensures your claim is registered and ready to progress once the pause is lifted.
Regulatory Context and the Ongoing Car Finance Scandal
The car finance scandal is still developing. The FCA has estimated that millions of agreements could be affected [5].
Consumer groups such as Which? have been advising motorists to check their finance documents, as inflated interest rates may have cost them thousands of pounds more than they should have paid [6]. The BBC has also highlighted how some dealers were rewarded for selling higher interest deals [7] regardless of whether that was in the customer’s best interest.
The FCA has told lenders to be prepared for large numbers of complaints and to make sure they are handling them fairly. Some providers now have up to 45 weeks to respond to cases under temporary FCA rules [8].
Key Differences Between PPI Claims and Car Finance Claims
Myths and Misconceptions
"My car finance agreement is too old"
If it was taken out between 2007 and 2021, you may still have a valid claim even if it has been fully repaid.
"I need all my paperwork to claim"
Having the paperwork helps, but lenders and finance companies must give you copies if you ask for them.
"Claiming is complicated and expensive"
The FOS allows you to make a claim yourself free of charge, or you can enlist the services of regulated finance claims experts to manage the procedure for you.
The PPI Claims Process (Historic)
The process for making a PPI claim closed on 29 August 2019. Before this deadline, consumers who believed they had been mis-sold a PPI policy followed these steps:
- Gather documents and request details of your PPI policy if you do not have them.
- Explain why you believe the policy was mis-sold and contact your lender.
- Wait for a response from lenders within eight weeks.
- Escalate to the FOS within 6 months if you are unhappy with the outcome.
- The FOS will review the evidence and issue a decision.
Although new PPI claims can no longer be submitted, the lessons from the PPI scandal have influenced how current large-scale mis-selling cases, such as car finance claims, are managed today.
Claims Process in Car Finance
Making a car finance claim is simple once you know the steps. Because the pause on lender replies means it is not expected to end until 4 December 2025, starting your claim now means it is in the system and ready to move on once the pause ends.
- Get the proof - Get a copy of your finance agreement and all documentation regarding commission.
- Contact your finance provider - Explain why you felt the agreement was unfair or mis-sold.
- Wait for response - eight weeks usually but up to 45 weeks under temporary rules, most responses will be paused until 4 December 2025.
- Escalate to the FOS – Submit your complaint online or in writing if you are not satisfied.
- Investigation - The FOS will consider your case and decide if you are owed compensation.
Starting early can save time later. By preparing your evidence now, you can move quickly once lenders resume handling complaints, ensuring your claim is not delayed any further.
Consumer Rights & Legal Timeline
In the event you had been mis-sold a financial product, the law is on your side. You're treated fairly under a number of crucial UK rules as well as protections and you have the right to challenge any unjust agreement.
- Consumer Credit Act 1974 - Lenders have to clearly communicate your agreement to you to make sure that you understand what you're agreeing to.
- FCA Principles for Business - All regulated companies must conduct themselves truthfully, deal with customers fairly and put your interests first.
- The Consumer Rights Act 2015 - This legislation prevents the use of unfair clauses in contracts and permits you to challenge any clause that is unclear or unreasonable.
- If you are not able to resolve a complaint with your lender directly, you can submit it to the FOS for an independent review and determination.
In case you believe you've been treated unfairly, these protections provide you with means to seek redress and be heard.
Car Finance Claims Important 2025 Milestones
- 1 August 2025 - Supreme Court ruling on key commission disclosure case [9] . This might be the standard for how similar claims are treated.
- October 2025 - The FCA will launch a six-week consultation [10] with lenders, consumer groups and others on how outstanding and future car finance complaints should be dealt with.
- December 2025 - All lenders hold off on replies to car finance complaints until 4 December 2025. Responses will probably restart under any updated FCA guidance after this date.
- Late 2025/Early 2026 - Final FCA guidance following consultation is expected, possibly including new rules for handling claims.
- Into 2026 - Industry-wide redress schemes or settlements may be introduced into 2026 if the FCA and courts find widespread mis-selling occurred.
Making your claim before these events means you will be in the system and less likely to be affected by any new restrictions.
Why Acting Now Matters
With PPI, many missed the 2019 deadline. For car finance and PCP claims there is no deadline yet, although that could change once the FCA sets new rules. Starting your claim now ensures you do not lose the opportunity to recover money you may be owed.
Final Thoughts
Those PPI claims have changed how the UK deals with financial mis-selling. The car finance scandal may be just as big. Know your rights and the process before you file a claim yourself or hire finance claims experts.
_________
References:
- hidden broker commissions and inflated interest rates - https://www.fca.org.uk/news/press-releases/fca-acts-stop-motor-finance-discretionary-commission-models
- lack of transparency meant they were entitled to refunds - https://www.financial-ombudsman.org.uk/consumers/ppi
- £38 billion was refunded to consumers - https://www.bbc.co.uk/news/business-49545682
- (FCA) banned these arrangements because they encouraged dealers to prioritise their own earnings over the customer’s best interest - https://www.fca.org.uk/publication/thematic-reviews/tr20-1.pdf
- FCA has estimated that millions of agreements could be affected - https://www.fca.org.uk/news/statements/motor-finance-update
- inflated interest rates may have cost them thousands of pounds more than they should have paid - https://www.which.co.uk/news/article/motor-finance-commission-claims-a2V7n7p4gqPI
- some dealers were rewarded for selling higher interest deals - https://www.bbc.co.uk/news/business-64240760
- up to 45 weeks to respond to cases under temporary FCA rules - https://www.fca.org.uk/news/statements/fca-temporary-complaint-handling-rules-motor-finance
- Supreme Court ruling on key commission disclosure case - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
- FCA will launch a six-week consultation - https://www.fca.org.uk/news/statements/fca-consult-compensation-scheme-motor-finance-customers