Car finance redress
What Is a Discretionary Commission Arrangement (DCA)?
Independent and free. We're not a claims firm — here's the mechanism in plain English.
Redress estimate
Any figures here are an estimate, not a promise, and nothing on this page is financial or legal advice. You can claim free yourself — you don't need a claims firm.
A discretionary commission arrangement (DCA) let a car dealer or broker raise your finance interest rate within a range, and earn themselves more commission the higher they set it. Because the higher your rate, the more they were paid, some borrowers paid more interest than they needed to.
The FCA banned DCAs on 28 January 2021, and they sit at the heart of the car finance scandal and the 2026 redress scheme. Any figure you see is an estimate, not a promise — nobody is guaranteed a payout, and the amount depends on your own agreement. Check your position with the compensation estimator, then read the scandal explained.
What is a discretionary commission arrangement (DCA)?
A DCA is a deal where the dealer or broker could choose your interest rate within a range set by the lender, and earned more commission the higher they set it. The FCA banned this practice on 28 January 2021.
The lender set a "target" rate and a higher ceiling. The broker could then push your rate toward the ceiling, and the difference between the two was paid to them as commission. Moving it up earned more commission — a clear conflict of interest, because the person arranging your finance was rewarded for charging you more.
On a typical deal, a 2–3 percentage point increase in the APR could mean hundreds of pounds of extra interest over the term, paid by you, flowing to the broker as commission. The FCA concluded that this conflict was severe enough to create an "unfair relationship" between borrower and lender — the test the Supreme Court applied in August 2025.
How a DCA worked in practice
DCA vs other commission types
The 2026 scheme treats three commission problems differently. A DCA is the clearest, but a large fixed commission or a hidden tie can also qualify if it was not disclosed.
Eligibility was tightened between the consultation and the final scheme (PS26/3). The FCA excluded 0% and minimal-commission deals, because there was no commission-driven conflict to put right.
| Type | How it worked | In scope? |
|---|---|---|
| Discretionary commission (DCA) | Broker raised your rate to earn more; banned 28 Jan 2021 | Yes — if not disclosed |
| High-commission arrangement | Fixed commission at least 39% of cost of credit AND 10% of loan | Yes — if not disclosed |
| Contractual tie | Broker tied to one lender, limiting your choice | Yes — if not disclosed |
| Properly disclosed commission | Clearly explained in a way the FCA accepts | Generally no |
| 0% / minimal commission | No meaningful commission paid | No — excluded |
Did your agreement have one?
You often can't tell from the paperwork alone, because DCAs were rarely spelled out. The strongest clues are the date, the route and how your rate was set.
The surest way to find out is to ask the lender directly — our letter template does exactly that, asking whether a DCA applied and how much commission was paid.
- Your finance started between 6 April 2007 and 28 January 2021 (DCAs were banned on the latter date; the wider scheme window runs to 1 November 2024 to catch high-commission and tie cases too).
- It was arranged by a dealer or broker, not a loan you set up directly with a bank.
- Nobody clearly explained how your interest rate was decided or what commission was paid.
- Your APR feels higher than rates advertised around the time you took the deal out.
Why DCAs were unfair
DCAs were unfair because they rewarded the broker for making your finance more expensive, without telling you. Your interests and theirs pulled in opposite directions.
This is the conflict the Supreme Court examined on 1 August 2025, applying the unfair-relationship test in section 140A of the Consumer Credit Act 1974. The FCA had already acted — it banned DCAs on 28 January 2021 after a market review found widespread harm — and the ruling then confirmed that undisclosed commission of this kind can itself make the relationship unfair.
The FCA's redress scheme (PS26/3, 30 March 2026) followed. It applies the same logic across the industry rather than case by case in court.
The conflict in one line
Which years are affected?
The scheme window runs from 6 April 2007 to 1 November 2024, but DCAs themselves were in use only until the FCA ban on 28 January 2021. Deals arranged after the ban should not carry a DCA.
Why does the window run past the ban? Because the scheme also covers high-commission arrangements and contractual ties that continued after DCAs ended. So even a 2022 or 2023 deal could be in scope — but only if an undisclosed high commission or tie applied.
If your deal sits inside that window, it's worth checking. Any figure you see is an estimate, not a promise — nobody is guaranteed a payout, and the amount depends on your own agreement.
How redress is worked out for a DCA
For a DCA, redress is built around the extra interest you paid because the broker raised your rate, plus interest on top. The average across the scheme is about £829 per agreement.
In practice the lender works out what your rate would have been without the DCA, calculates the interest difference, adds interest on top to reflect the time you were out of pocket, and applies a cap where the rules require it (about one in three qualifying cases). Any figure you see is an estimate, not a promise — nobody is guaranteed a payout, and the amount depends on your own agreement.
Worked example: a £12,000 HP over 48 months
The three steps the lender follows
Under PS26/3, a DCA redress calculation runs in three stages: identify, reprice, reconcile. The lender does this when it assesses your agreement.
You don't have to do the maths yourself. The lender is obliged to work it out, send you a written offer if you qualify, and explain how it reached the figure. If the number looks wrong, you can ask for the workings, and if you still disagree, the Financial Ombudsman will recheck it for free.
- Identify whether a DCA applied to your agreement and what commission was actually paid to the broker.
- Reprice the deal at the rate you would likely have been offered without the DCA — usually the lender's target rate at the time.
- Reconcile the interest difference, add 8% statutory-style interest on top, then apply the cap if your case falls into the roughly one-in-three that is capped.
DCA vs non-DCA deals
A non-DCA deal still has commission — it just isn't flexed with your interest rate. That matters because the scheme treats the two differently.
So a post-2021 deal with a fixed, properly disclosed commission is generally fine. The problem on a non-DCA deal only arises if the commission was large enough to count as a high-commission arrangement (at least 39% of total cost of credit and 10% of the loan) or came with an undisclosed contractual tie.
| Feature | DCA deal | Non-DCA deal |
|---|---|---|
| Who set the rate | Broker chose within a lender range | Lender set a fixed rate |
| Commission linked to rate | Yes — higher rate, higher pay | No — commission is fixed |
| Banned by FCA | Yes — 28 January 2021 | No — fixed commission still allowed |
| Route into the scheme | Undisclosed DCA triggers it | Only if a high-commission arrangement or contractual tie applies |
| Typical redress logic | Return the rate gap plus interest | Return the commission effect if thresholds are met |
Where DCAs appeared most often
DCAs were concentrated in dealer-arranged finance between roughly 2007 and 2020, and they show up across PCP, HP and personal loans secured on a car. The product type didn't protect you — the broker route did.
Industry reviews by the FCA found DCAs were widespread in showroom-arranged finance, where a dealer introduced you to a panel of lenders. A direct loan from your own bank, with no introducer, could not carry a DCA because there was no broker to flex the rate. That's why a direct bank loan you arranged yourself sits outside the scheme.
Within dealer finance, PCP and HP deals both carried DCAs. PCPs were more exposed simply because far more of them were sold, and the longer term amplified the interest gap.
Watch out for DCA claims-firm traps
Because DCAs are the clearest trigger, they are also the favourite hook for claims-management marketing. Know the signs so you keep all of any payout.
- 'We've checked, you definitely had a DCA' — no firm can know that before contacting your lender; only the lender's records confirm it.
- 'Sign now before the deadline' — there is no deadline pressure; you have until 31 August 2027 if no firm contacts you, and a free complaint runs anytime.
- 'No win, no fee' — true, but 'no fee' still means up to about 36% of any payout if you win, money you keep 100% of if you DIY.
- 'We can speed up your claim' — the scheme and the ombudsman treat DIY and CMC complaints at the same pace; a CMC cannot jump the queue.
The DCA redress is yours, not the firm's
Were you mis-sold?
The next step is to check your own deal against an honest checklist — then estimate, for free. No claims firm required.
Work through am I eligible, then try the compensation estimator. Claiming is free and you can do it yourself: complain to your lender first, then escalate to the Financial Ombudsman Service. You do not need a claims-management company taking a cut.
Frequently asked
What is a discretionary commission arrangement (DCA)?
Did my agreement have a DCA?
Why are DCAs unfair?
What years are affected?
How much could a DCA claim be worth?
How is DCA redress actually calculated?
Are DCAs the only thing the scheme covers?
Can I claim if my DCA deal ended years ago?
Sources
We cite regulators and official UK sources only.
- Financial Conduct Authority — motor finance redress schemefca.org.uk
- UK Supreme Courtsupremecourt.uk
- Consumer Credit Act 1974legislation.gov.uk
- Financial Ombudsman Servicefinancial-ombudsman.org.uk
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