What Is a Discretionary Commission Arrangement (DCA)? Explained Simply
Scheme status (updated 5 August 2026): parts of the FCA motor finance redress scheme are temporarily suspended while the Upper Tribunal considers legal challenges. Lenders do not currently have to calculate or pay compensation under the scheme, the original decision and payment dates no longer apply, and no payment under the scheme is guaranteed. If the scheme proceeds, first payments are expected in 2027 at the earliest. Any dates mentioned below were set before the suspension.
A Discretionary Commission Arrangement (DCA) was a type of hidden payment that allowed car dealers to increase your interest rate and earn more money without telling you. DCAs were used in millions of UK car finance agreements between 2007 and 2021 — and are the central reason the FCA has launched the largest consumer compensation scheme since PPI.
In this guide
- The Simple Explanation
- A Real-World Example
- Why Were DCAs Allowed?
- How Common Were DCAs?
- DCA vs Fixed Commission — What Is the Difference?
- How Do I Know If My Agreement Had a DCA?
- Frequently Asked Questions
- Related Guides
- Our Partner's Fees Explained
- Think You May Have a Motor Finance Claim?
The Simple Explanation
When you arranged car finance at a dealership, the salesperson was not just selling you a car — they were also arranging a loan on behalf of a finance company. Under a DCA, the finance company gave the dealer the power to choose your interest rate anywhere within a set range.
The catch: the higher the interest rate the dealer set, the more commission they earned. You were not told this was happening. You did not know the dealer had any ability to change your rate, let alone a financial incentive to push it higher.
A Real-World Example
Imagine financing a £15,000 car over four years. The finance company’s minimum rate is 5%, but the dealer sets it at 9% — because they earn double the commission at 9% compared to 5%.
At 5%, your monthly payment is around £345. At 9%, it rises to approximately £373. Over four years, that is a difference of more than £1,340 — money that went directly to the dealer as commission, with no benefit to you.
The FCA estimates that on a typical £10,000 agreement, customers overpaid approximately £1,100 in interest due to DCA practices.
Why Were DCAs Allowed?
DCAs existed in a regulatory grey area for many years. Commission payments to dealers were standard practice and not inherently illegal — the problem was that customers were not properly told about them. FCA disclosure rules required the commercial relationship to be explained, but this was routinely ignored or buried in small print.
The FCA banned DCAs on 28 January 2021. The Supreme Court’s judgment in August 2025 in Johnson v FirstRand Bank confirmed that the practice was unlawful going back to April 2007, providing the legal basis for the PS26/3 redress scheme.
How Common Were DCAs?
Extremely common. The FCA estimates around 40% of all eligible car finance agreements included a DCA. Lender-specific data from the FCA’s investigation shows:
- Black Horse (Lloyds): 57% of customers who complained were confirmed as having a DCA. Only 2% were told they definitely did not.
- Santander Consumer Finance: 63% confirmed as having a DCA. Only 15% were told they did not.
- Barclays Partner Finance: 61% confirmed DCA. Only 10% were told they did not.
If you had car finance before January 2021 and have never checked, the statistical probability that your agreement included a DCA is very high.
DCA vs Fixed Commission — What Is the Difference?
A fixed commission is where the dealer earns a set amount regardless of the interest rate — removing the incentive to inflate it. Fixed commissions were not automatically unfair. The FCA scheme covers fixed commissions separately only where they were unusually high.
A DCA is unfair by its structure — because the incentive to overcharge was built in and hidden. That is why 40% of all eligible agreements are estimated to have included one.
How Do I Know If My Agreement Had a DCA?
You were almost certainly not told at the time. The ways to find out now:
- Submit a complaint to your lender — they must now confirm whether a DCA was in place
- Use Claims Bible’s free agreement checker — we trace your agreements and assess eligibility
- Wait for the FCA scheme — lenders must contact eligible non-complainants by late 2026 or early 2027. However, complaining now means you are paid significantly sooner.
Frequently Asked Questions
Can I still claim if I don’t know whether I had a DCA?
Yes. Submit a complaint and your lender must check. You do not need to prove the DCA existed — the burden shifts to the lender to confirm or deny it. If they cannot confirm it did not exist, the agreement is assessed under the scheme methodology.
My lender told me I did not have a DCA. Can I still claim?
Yes. Re-submit under the expanded FCA criteria — the scheme also covers unfairly high fixed commission and contractual ties. A finding of no DCA does not automatically mean no claim.
DCAs were banned in 2021 — why do agreements back to 2007 qualify?
The ban applies to new agreements from 2021. The FCA confirmed that consumer protection laws in place since April 2007 already prohibited the non-disclosure of DCAs. The scheme therefore applies retrospectively to all agreements from that date.
Was my dealer breaking the law?
The Supreme Court found that undisclosed DCAs with misleading conduct were unlawful under Section 140A of the Consumer Credit Act 1974. Your claim goes to the lender as the regulated party.
Related Guides
FCA Car Finance Redress Scheme Explained
Black Horse Car Finance Claims
Back to Car Finance Claims Hub
You will be redirected to our partner’s website to complete your claim.
Think You May Have a Motor Finance Claim?
The FCA estimates average compensation of around £830 per eligible agreement, but eligibility and payment amounts vary. Some customers may receive nothing. Complaints about agreements started from 1 April 2014 should be submitted by 30 June 2026 to be considered under the earlier timetable. Different dates apply to older agreements. The scheme is currently subject to legal challenge, so dates and payment timings may change.
