A discretionary commission arrangement, or DCA, was a commission structure used in some car finance deals, mainly between 2007 and 2021, that let the dealership arranging your finance set your interest rate within a range set by the lender. The higher the rate the dealer set, the more commission they earned, often without this being properly explained to the customer at the time.
In more detail
Why did DCAs cause a problem?
The Financial Conduct Authority found that this structure created a clear conflict of interest, the dealer arranging your finance had a direct financial incentive to charge you a higher interest rate, rather than acting purely in your interest to find the best deal. Many customers were never told that the dealer had any influence over their rate at all.
When were DCAs banned?
The FCA banned discretionary commission arrangements from January 2021. However, the redress scheme introduced under PS26/3 looks back at agreements made under this structure between 2007 and 2024, since the ban itself didn't compensate people who were already affected by older agreements.
How would I know if my agreement had a DCA?
Most customers wouldn't have known at the time, that's the core of the issue. If you had a PCP or HP agreement arranged through a dealership between 2007 and 2021, it's worth checking rather than assuming you weren't affected, since DCAs were used widely across the industry during this period.
Is a DCA the same as just paying a dealer commission?
No. Commission itself isn't inherently a problem, many financial products involve commission. The issue with DCAs specifically was the discretion given to the dealer to set your rate for their own financial benefit, without disclosing this conflict of interest to you.