Introduction - Why People Get Confused

The FCA car finance investigation has brought millions of historic car loans into the spotlight. News articles and social media posts often use the terms “undisclosed commission” and “discretionary commission arrangement” as if they mean the same thing.

It is easy to see why. In both situations, the dealer or broker was paid by the lender without telling the customer clearly. However, there are two different types of undisclosed commission claims. One is the Discretionary Commission Arrangement (DCA) and the other is the Fixed Undisclosed Commission.

Knowing the difference means you decide whether you can claim, how much you could get and how simple or complicated the process will be.

Quick Definitions - Side-by-Side Comparison

Understanding the difference between a discretionary commission arrangement and a fixed undisclosed commission is important when determining whether you can claim. See the details on each below:

Discretionary Commission Arrangement (DCA)

What is a DCA in car finance: A system under which the dealer or broker could charge above the lender's base rate. They received more commission the higher the rate was increased.

Key Feature: Commission is variable and linked to making the interest rate higher.

Fixed Undisclosed Commission

What is Undisclosed Commission: A system where the dealer or broker was paid a set commission amount, regardless of the interest rate charged.

Key Feature: Only becomes claimable if the commission was hidden and very large.

Both types are considered undisclosed commissions because the customer was not told about the payment to the dealer [1].

How They Work - Real-Life Examples

Discretionary Commission Arrangement (DCA)

Imagine your lender approved you for car finance at 6% interest. The dealer could change that rate. They raised it to 9%. You paid more over the term of the loan and part of that extra interest was given to the dealer as commission. You were never told that your dealer’s commission depended on charging you more [2].

This is why DCAs have been a major focus for the FCA; the system directly rewarded dealers for making loans more expensive.

Fixed Undisclosed Commission

In this case the dealer gets paid a fixed amount like £300, irrespective of interest rate. No built-in incentive to raise the rate. However, if that £300 represented a large percentage of the total interest on the loan, and you were never told about it, the agreement could be considered unfair under the Consumer Credit Act 1974 [3].

Proving this is harder because you need detailed figures from the lender.

Legal Position - Key Court and FCA Decisions

• DCA Ban (January 2021) - The FCA has banned discretionary commission arrangements [4] for new loans after finding they inflated costs and created conflicts of interest.
• Court of Appeal ruling (October 2024) - lenders could not receive commission unless customers gave informed consent [5].
• Supreme Court Decision in Johnson Case (August 2025) - Narrowed this scope again. This Court concluded that dealers have no general duty to serve the customer best, but very large hidden commissions can still make a loan unfair [6].
• FCA Redress Scheme (Expected October 2025) [7] - The FCA has said it will create a scheme to provide automatic payouts for DCA claims and may include some high-commission fixed cases.

Average Payouts

• DCA claims average payout - The undisclosed commission claims average payout for DCAs is expected to be around £950 per agreement [8].
• Fixed Undisclosed Commission Claims average payout ​- No set average yet. Very few cases have succeeded and each depends on the commission size.

Timeline of Events

Discretionary Commission Arrangements (DCA) Timeline

• From 2007 to 2021 - DCAs were common in motor finance.
• Jan 2021 - FCA bans DCAs for all new agreements.
• Jan 2024 - FCA launches investigation.
• Mar 2025 - FCA confirms it will consult on a redress scheme six weeks after the Supreme Court decision.
• Aug 2025 - Supreme Court confirms DCAs are eligible for redress.
• Oct 2025 - FCA consultation expected to run for six weeks.
• 4 Dec 2025 - Lenders do not have to respond to complaints before this date.
• Late 2025 / Early 2026 - FCA final guidance expected.
• Into 2026 - Industry-wide redress scheme may be introduced.

Fixed Undisclosed Commission Timeline

• 2007 to 2021 - Common in motor finance and often not disclosed.
• Oct 2024 - Court of Appeal rules commission payments require "full informed consent"
• Oct 2019 - All commission complaints are put off until Dec 2024 by FCA.
• Aug 2025 - The majority of fixed commission claims are limited by the Supreme Court.
• Oct 2025 - FCA consultation on “unfair” commission threshold.
• 4 Dec 2025 - Lenders do not have to respond before this date.
• Into 2026 - Possible redress schemes if mis-selling is confirmed.

Claim Difficulty and Process

DCA Claims

• Ease: Straightforward under FCA scheme.

Steps:

• Confirm the finance agreement was between 2007-2021.
• Wait till FCA scheme or use FCA tool when launched.
• Payment if eligible.

Fixed Undisclosed Commission Claims

• Ease: More complex, often requiring solicitor involvement.

Steps:

• Request your finance agreement and charges.
• Calculate commission and percentage of interest.
• If large and hidden, complain to lender.
• If rejected, escalate to the Financial Ombudsman Service [9] or consider legal action.

Common Consumer Mistakes to Avoid

• Assuming all undisclosed commissions are claimable. Only DCAs have broad eligibility.
• Choosing a service without understanding the fees. While some people choose to go directly through the FCA or Ombudsman for free, a reputable claims company can provide expertise, save you time, and manage the process for you on a no win, no fee basis.
• Mixing up variable and fixed commission types, which can lead to starting the wrong kind of claim.
• Misplacing or discarding finance agreements and statements that could be vital for proving a fixed commission case.

Decision Flowchart: Which Type Applies to You?

Before you start a claim, it helps to know which category your agreement falls into. This flowchart shows whether your case is likely to be a DCA, a fixed undisclosed commission, or unlikely to qualify.

Conclusion

The FCA car finance investigation is the largest review of motor finance practices in years. DCA claims are expected to be paid quickly under the FCA’s upcoming redress scheme, with an average payout of £950. Fixed undisclosed commission claims are possible but harder to prove and only apply to very large hidden commissions.

Understanding undeclared commissions and DCAs versus fixed commissions will help you avoid bad advice and recover money owed.

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1. Both types are considered undisclosed commissions because the customer was not told about the payment to the dealer - https://www.which.co.uk/news/article/hidden-car-finance-commission-refunds-what-you-need-to-know-aN3vX1G1tKae
2. You were never told that your dealer’s commission depended on charging you more - https://www.moneysavingexpert.com/news/2025/08/car-finance-supreme-court-martin-lewis/
3. agreement could be considered unfair under the Consumer Credit Act 1974 - https://www.legislation.gov.uk/ukpga/1974/39/contents
4. FCA has banned discretionary commission arrangements - https://www.fca.org.uk/news/press-releases/fca-bans-discretionary-commission-models-motor-finance
5. lenders could not receive commission unless customers gave informed consent - https://www.macfarlanes.com/what-we-think/102eli5/the-supreme-court-s-ruling-on-the-johnson-car-finance-case-lifts-the-bonnet-on-the-distribution-and-manufacture-of-retail-financial-services-102kyxb/
6. dealers have no general duty to serve the customer best, but very large hidden commissions can still make a loan unfair -  https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
7. FCA Redress Scheme (Expected October 2025) - https://www.fca.org.uk/news/statements/fca-consult-compensation-scheme-motor-finance-customers
8. average payout for DCAs is expected to be around £950 per agreement - https://www.fca.org.uk/news/statements/fca-consult-compensation-scheme-motor-finance-customers
9. escalate to the Financial Ombudsman Service - https://www.financial-ombudsman.org.uk/consumers/how-to-complain