Discretionary Commission Arrangements in Car Finance

How did a DCA work?

The lender set a range of interest rates, and the broker chose where your rate sat in that range: the higher the rate, the more commission the broker earned. The commission arrangement was discretionary because the broker, not the lender, chose the rate. The FCA describes DCAs as arrangements that "linked the broker's commission to the interest rate" and "gave the broker discretion to set or adjust the interest rate" (CP25/27). The bottom of the range was the rate at which the broker earned no commission from that choice (CONRED 5.2.19R).

Three figures from the FCA's own analysis show how common and how costly DCAs were:

• Prevalence: around 61% of motor finance agreements from April 2007 to the January 2021 ban involved a DCA (CP25/27, paragraph 2.17).
• Scale: the FCA identified about 15.4 million DCA agreements from April 2007 to October 2024, around 47% of all agreements in that period (CP25/27).
• Cost: DCA loans carried higher APRs than loans with flat-fee commission, and the scheme's 17% APR adjustment comes from that gap (PS26/3, paragraph 1.27).

The FCA found no satisfactory way to remove the conflict of interest built into a DCA, so it banned them (CP25/27, paragraph 2.16). The more harmful forms of DCA were more common in earlier years, when the gaps between DCA and non-DCA APRs were also wider. That is why Scheme 1, for agreements before 1 April 2014, uses a 21% adjustment instead of 17% (PS26/3, paragraphs 1.29 and 1.30).

When were DCAs banned?

The FCA's ban on DCAs in motor finance took effect on 28 January 2021.

The FCA set the ban in policy statement PS20/8 (CP25/27, paragraph 2.16). Complaints about DCAs later led the FCA to pause complaint handling from 11 January 2024 (PS24/1), and then to the court rulings and the redress scheme. Agreements that started from 28 January 2021 to 1 November 2024 cannot have a DCA, but they can still be in the scheme through high commission or a tie. For agreements made before the ban, the scheme uses the ban's definition of a DCA and applies it backwards (CONRED 5.1.3R).

How can you tell if you had a DCA?

Usually you cannot tell from your own paperwork: your lender holds the records, and the scheme makes it check them. Three signs make a DCA possible:

• your agreement started before 28 January 2021;
• the dealer or a broker arranged the finance, not the lender directly;
• the paperwork mentions commission without saying it was linked to your interest rate.

The lender checks its own records first and asks the broker for any it lacks (CONRED 5.2), and brokers must answer within 1 month (FCA, 2 July 2026). Lenders and brokers were expected to keep records showing whether there was a DCA for agreements that started before 28 January 2021 and ended on or after 11 January 2018 (CONRED 5.2). A lender that says your DCA does not count because you got the lowest rate has to prove that with evidence (CONRED 5.2.19R).

The simplest check is to ask. In your complaint, ask your lender to confirm the commission, the APR and whether there was a DCA or a tie. Old bank statements, the dealer or your credit file show who the lender was, and asking costs nothing. The steps are in How to claim mis-sold car finance yourself, for free. Check any reply against the FCA's list of lenders before you share bank details.

Commission claims: DCA, high commission and ties

A car finance commission claim under the scheme needs at least one of three arrangements that you were not properly told about: a DCA, high commission or a tie. Hidden commission and undisclosed commission are the everyday names for the same problem. A PCP commission claim follows the same test as a hire purchase or conditional sale claim.

Two general exceptions cover all three arrangements: commission of £120 or less for agreements before 1 April 2014, or £150 or less from that date, and an APR of 0% (CONRED 5.2.19R and CONRED 6.2.19R). For a DCA, proper disclosure meant telling you how the commission was linked to your rate and that the broker could choose that rate, not only that commission was paid (PS26/3, chapter 5). Searches for "the 50% rule" on car finance return pages about voluntary termination, handing the car back, which is a separate right and not this commission test.

What is the captive-lender exception?

A tie does not count where the lender was the car maker's own finance company, the dealer was a franchised dealer of that brand, and the brand was clearly shown. The brand had to appear at the dealer's premises or a clearly separate area of them, in the marketing you saw before signing, and in the agreement itself (CONRED 5.2.20R). The lender has to prove all three.

The exception covers only the tie, so a DCA or high commission on the same agreement still counts. It is also part of the legal challenge, and lenders relying on it do not send "not owed" letters while the challenge is heard (FCA, 2 July 2026). The car makers' finance companies appear in car finance claims by lender.

How does the scheme treat a DCA compared with no DCA?

A DCA brings an agreement into the scheme on its own, rules out the lender's "no better deal" defence and puts a floor under the lower APR used to measure your loss. The most common alternative was a flat fee that stayed the same whatever rate you paid (CP25/27).

Sources: CONRED 5.4.9R and CONRED 6.4.9R for the lower APR; PS26/3 chapter 10 for the "no better deal" defence; PS26/3 paragraph 1.23 for the out-of-time group. Two rules apply either way: an APR at or below the lowest 5% of APRs for the year gives £0, and the three caps limit the hybrid remedy.

Worked example: a DCA with low commission

This agreement gets an estimate of £499.02: the DCA alone brings it into the scheme, and a cap cuts the figure. The example is built from the FCA's rules with our reference calculation, not taken from a real case. The agreement started on 1 September 2017 for £8,000 at 24.9% APR over 48 months, with £400 commission and a DCA. It ran to term, and interest runs to 31 March 2027. The lowest rate the broker could have chosen is not known here, so the lower APR is the standard 17% reduction.

Without the DCA, this agreement gets nothing: the commission is below the high commission level, and there was no tie. An APR of 3.20% or lower, the lowest-5% figure for 2017, would also give £0 (CONRED 5.4.7R). Each line is rounded to the penny.

How does a DCA change your estimate?

The car finance claim calculator asks whether there was a rate-setting arrangement, and an answer of "Not sure" makes it assume there was one and say so next to the result. The answer defaults to No for agreements from 28 January 2021, because of the ban. A second question asks for the lowest rate the dealer could offer, because a DCA stops counting at that rate. The calculator methodology page lists every rule the calculator applies.

You can complain to your lender or use the FCA scheme for free.

Questions about DCAs

Four questions people ask about DCA claims, answered from the FCA's rules as of 15 October 2026.