If you have been following the car finance mis-selling story, you will have heard the phrase discretionary commission arrangement — or DCA — mentioned repeatedly. But what exactly is a DCA, why was it banned, and why does it matter for your potential claim?
The Basic Concept
When you take out car finance through a dealership, the dealer acts as a credit broker. They receive a commission from the lender for arranging the deal. Under a discretionary commission arrangement, the dealer had the power to set the interest rate on your agreement within a range. The higher the rate they set, the more commission they earned — directly at your expense.
Why This Was a Problem
This created a direct conflict of interest. The dealer was supposed to be acting on your behalf, but their financial incentive pointed in the opposite direction. Because customers were never told about this arrangement, there was no way to challenge it or negotiate. You thought you were getting a fair rate; in reality it may have been inflated to boost the dealer’s commission.
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When Were DCAs Used?
DCAs were widespread from at least 2007 until 28 January 2021, when the FCA banned them outright. The regulator found clear evidence that they led to customers being charged more than necessary, and that non-disclosure of the arrangement was a breach of legal duty.
Who Was Affected?
The practice was industry-wide. If you took out a PCP or HP agreement through a dealership before January 2021, there is a reasonable likelihood that a DCA was in place. This applies across lenders including Black Horse, Santander, Close Brothers, MotoNovo, and many others.
What Happens Now?
Following the Court of Appeal and Supreme Court rulings, affected customers are entitled to seek redress. Check your eligibility today to find out whether you could be due a refund on the interest you were overcharged.