Personal contract purchase undisclosed commission (PCP UDC) claims: what you need to know

Personal contract purchase (PCP) car finance has become a popular method of financing vehicle purchases. However, concerns have been raised about undisclosed commissions received by dealerships or brokers.

A guide to personal contract purchase undisclosed commission PCP UDC claims

At VWM Capital, we offer investment opportunities in UK litigation claims that are uncorrelated to traditional capital markets and, therefore, relatively insulated from market volatility. Among the litigation claims we fund are personal contract purchase undisclosed commission (PCP UDC) claims. Below you can find out more about these cases.

When purchasing a new car, more and more consumers in the UK are taking out personal contract purchase (PCP) policies as an alternative method of acquiring the necessary funds. Unfortunately, evidence has come to light that dealerships or brokers involved in PCP arrangements may have received undisclosed commissions. As part of a 2019 report, the Financial Conduct Authority (FCA) stated that “commission arrangements operating in motor finance may be leading to consumer harm on a potentially significant scale”, estimating a staggering 95% of UK car finance PCP agreements may be affected.

As a result, many consumers are taking legal action – often with the help of litigation funding. To give you a better understanding of these litigation claims, we’ve put together this guide.


What are personal contract purchase undisclosed commission (PCP UDC) claims?

Cars can, of course, be purchased outright, but the cost is usually out of reach for the average person. To make vehicles more affordable and accessible, many dealerships offer PCP agreements that effectively act like a long-term rental – allowing the customer to use the car for a monthly fee until the contract ends.

When selling this type of contract, the dealership or broker must give the customer full details of any commission payments they will receive as a result of the sale. Non-disclosure raises concerns about potential conflicts of interest, lack of transparency, and potential breaches of regulatory requirements. The customer may argue that this withholding of information resulted in higher costs, unfair terms, or a lack of clarity as to what they were signing up for.

From a legal standpoint, this contradicts the following references:

  1. UK Consumer Protection Regulations state that consumers have the right to full transparency regarding the costs, terms, and any commissions associated with a financial agreement. By not disclosing this information, a broker or dealership would have violated these regulations.
  2. The FCA regulates the conduct of financial firms, setting rules that protect consumers and ensure that they’re treated fairly. Transparency is hugely important to the FCA, especially with regard to disclosing commissions and potential conflicts of interest. PCP car finance agreement cases usually involve issues with both.

If these violations can be proven in a court of law, rescission is a matter of right, and those affected will most likely be eligible for compensation.


Examples of personal contract purchase undisclosed commission (PCP UDC) claim case law

At VWM Capital, when we fund litigation claims, we look for established case law – where judgments in past cases have been made in favour of claimants, therefore setting a precedent for future rulings.  

Thankfully, there is a significant amount of case law when it comes to PCP UDC claims. For example:


Hurstanger Limited v Wilson [2007] EWCA Civ 299

During negotiations for a loan, a broker was paid a consumer fee by the borrower and a commission from the lender. Interestingly, the borrower was notified that a commission was being paid, but the court ruled that the broker had breached his fiduciary duty because he did not disclose the full amount of said commission. As a result, the lender was held liable to the borrowers as an accessory to the broker’s breach.


Consumer Credit Act 1974 S140A-S140C

Sections 140A-140C of the Consumer Credit Act 1974 deal with unfair relationships between creditors and debtors. S140A specifically states that the court may make an order “if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following—

(a) any of the terms of the agreement or of any related agreement;

(b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement;

(c) any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement).”

‘C’ in particular could be used to argue that a relationship where a broker or dealership has failed to disclose commissions earned is definitively unfair.


Bribery Act 2010

The Bribery Act 2010 is another good point of reference for PCP UDC cases. Within, offences related to being bribed are defined by six cases. Case 4 reads that bribery occurs when:

  1. A person (R) requests, agrees to receive or accepts a financial or other advantage, and
  2. the request, agreement or acceptance itself constitutes the improper performance by (R) of a relevant function or activity.

During a transaction like a PCP agreement, it is the responsibility of the broker or dealership to remain impartial and work in the consumer’s best interests. While accepting a commission is not illegal,  by agreeing to one and not disclosing the full amount, they have accepted a financial advantage that could affect their judgement without the consumer’s knowledge. 

The act goes on to clarify that “it does not matter whether R knows or believes that the performance of the function or activity is improper.”


Why VWM Capital funds these types of cases

The vast majority of those affected by PCP UDC will be everyday people with limited funds. Litigation funding provides the means for those with meritorious cases to access justice where it wouldn’t have been possible otherwise. 

Most of the PCP UDC cases we select for funding tend to settle well before reaching court – meaning we can target compound returns by reinvesting case payouts within the term of the investment. 

There is currently a rich pool of these relatively low-figure PCP claims in UK courts. Traditionally, the administrative burden involved in selecting and performing due diligence has limited the funding available for these types of claims. However, at VWM Capital, we’re proud to be one of the first litigation funds to use algorithm-based technology to improve legal financing. By automating admin-heavy elements of preselection, we’re able to process a high volume of lower-sum cases accurately. 

Using market-leading lawtech, we can accurately preselect the cases with a high probability of success. Then we consult legal experts to review the cases to ensure they have merit. Finally, our investment committee reviews and confirms them before accepting them into the portfolio.


Tech-enhanced litigation funding with ESG credentials

With so many PCP arrangements involving undisclosed commissions, the number being taken to UK courts is only set to increase. At VWM Capital, we combine the power of technology with human legal expertise to make it possible to provide fast-tracked funding for hundreds of lower-figure cases every week. This presents an attractive opportunity for investors to gain exposure to an alternative asset class uncorrelated to traditional capital markets. 

You can read more about how litigation funding works here. For all investment enquiries, please contact the team