Warning: Car Finance From Unregulated Lenders Risky
The FCA warns consumers about unregulated lenders offering car finance without ombudsman protection. Know your rights before signing any finance deal.
Car buyers are being warned about the risks of using unregulated lenders for vehicle finance after the Financial Conduct Authority highlighted serious gaps in consumer protection.
The FCA says consumers using these firms - including money brokers and financial leasing companies - have no access to the Financial Ombudsman Service if things go wrong.
Around 1,200 of these 'Annex 1' firms operate in the UK, registered only for anti-money laundering purposes. Unlike mainstream finance providers, they don't follow the FCA's conduct rules and offer limited consumer protection.
The watchdog is particularly concerned about cases where consumers are "encouraged to set up limited companies to access lending, such as unregulated bridging finance." This practice may appear to offer better finance terms but leaves buyers exposed if disputes arise.
The FCA has already raised concerns about anti-money laundering standards with these businesses, sending warning letters to CEOs in 2024 and following up with 300 firms in late 2025.
What This Means for Car Buyers
If you're considering finance from an unregulated lender:
• Check their registration status - verify directly with the firm • Understand the risks - you won't have ombudsman protection • Consider alternatives - regulated lenders offer stronger consumer rights • Avoid company setups - don't create a limited company just to access finance
The warning comes as some car buyers turn to alternative finance sources amid tighter lending criteria from traditional providers.
Know Your Rights
With regulated finance providers, you're protected by: • The Consumer Credit Act • FCA conduct rules • Access to the Financial Ombudsman Service • Compensation scheme protection
These protections don't apply to unregulated lenders, leaving you with limited recourse if payments are missed, vehicles are wrongly repossessed, or other disputes arise.
Before signing any car finance deal, verify your lender's regulatory status and understand exactly what protection you'll have. If something sounds too good to be true - particularly if you're asked to set up a company - it probably is.
For finance disputes with regulated providers, contact the Financial Ombudsman Service. For unregulated lender issues, you may need to pursue costly legal action.
