Updated: 13 April 2026
Originally Published: 19 August 2025
If you’ve been reading up on the FCA car finance investigation, you’ve likely stumbled upon phrases such as “discretionary commission arrangement” and “undisclosed commission.”
They’re regularly used interchangeably when discussing the car finance scandal which impacted millions of drivers nationwide.
When you first encounter these terms, they can sound jumbled and meaningless. Many believe they refer to the same thing, or think if you paid commission, you automatically have a car finance claim.
This isn’t true.
Not all levels of commission and impact can be paid car finance compensation under the 2026 FCA car finance rules. This guide is going to explain what a discretionary commission arrangement is vs fixed commission, how it affects your car finance mis-selling claim, and what it means for you.
Key Takeaway
Commission does not always equal a valid car finance claim.
You have a better chance if your agreement included discretionary commission, a restricted lender panel or exceptionally high hidden commission that crosses FCA guidelines.
If you're not sure, the easiest way to see if you have a claim is to find your agreement and fill in a car finance refund check to see where you stand.
The Three Types of Car Finance Mis-Selling in 2026
Each category explains how your agreement may have been affected.
1. Discretionary Commission Arrangements
Discretionary commission arrangements lie at the centre of the car finance scandal. These agreements allowed the dealer to manipulate the interest rate you paid (within limits set by the lender). The more they increased your rate, the more commission they received.
This incentivised dealers to act against your interests.
Many customers were paying over the odds for years without knowing why. Dealers were getting richer by hiking up the price of your agreement.
That’s why DCA claims are by far the most common car finance claim. And the ones with the best chance of car finance compensation.
2. Undisclosed or Restricted Lender Relationships
This relates to situations where some agreements may have only had limited or restricted lender choice.
The customer could have been under the impression that they were given a choice when the dealer may have been restricted to one lender or told to place one lender first.
If this was not transparently disclosed to the consumer this may fall under the FCA’s definition of mis-selling of car finance.
This will also fall under the current guidelines for undisclosed commission claims.
3. Unfairly High Commission
This is where undisclosed fixed commission comes in.
Fixed commission isn’t always an issue. Commission is standard in finance agreements.
But if a commission is higher than normal and undisclosed, it could be considered unfair.
The FCA has certain criteria for when these undisclosed commission claims are valid [2]. Therefore only a subset of agreements apply.
Discretionary vs Fixed Commission Explained Clearly
Understanding how these two models work makes it easier to see why some claims are stronger than others.
Discretionary Commission Arrangement
With a discretionary commission arrangement, the dealer had control over your interest rate.
If they increased your rate, your monthly payments increased, and so did their commission.
This is the key issue.
The dealer had both the ability and the incentive to increase your cost, often without clearly explaining how commission worked.
That is why discretionary commission agreements are at the heart of so many PCP claims and car finance claims in general.
Fixed Commission
If the dealer received a fixed commission, that means they were paid a set amount for arranging the deal.
The commission didn’t change depending on your rate of interest.
So there was no direct incentive to increase your price.
The problem comes when that payment is large enough to bring fairness into question, especially if it wasn't disclosed.
In those situations the FCA considers if the commission passes their benchmark for undisclosed commission claims and if it had significant financial impact.
What Counts As Eligible Commission in 2026
FCA car finance rules are now centred around fair treatment and impact.
Things you’re more likely to be entitled to compensation for if your finance agreement had:
- A discretionary commission product that impacted your interest rate
- A restricted lender relationship you weren’t made aware of
- High levels of undisclosed commission exceeding FCA benchmarks
These are the situations where mis-sold car finance is most likely to be identified.
What Does Not Usually Qualify
It is important to be realistic.
Not all commission based agreements will lead to a car finance refund or a PCP refund.
You’re less likely to be eligible if:
- The commission was small
- It did not affect your interest rate
- The commission was below FCA thresholds
- The structure of the deal was transparently explained
- It did not have significant financial impact
This is a change in the way the FCA approach car finance.
The focus is now on actual harm, not just the presence of commission.
Do I Qualify For A Car Finance Claim?
If you are unsure, this is a simple way to think about it.
You may qualify if:
- Your interest rate may have been increased by the dealer
- You were not told how commission worked
- You believed you had a choice of lenders but did not
- The commission involved appears unusually high
You are less likely to qualify if:
- Your rate was fixed and unaffected
- The commission was small
- The agreement was clearly explained
- There was no meaningful financial impact
If you are still unsure, the easiest step is to complete a car finance refund check.
This allows your agreement to be assessed properly and gives you a clearer understanding of your position.
Real Examples
Example 1. Discretionary Commission
You qualify for a loan at 6 percent.
The dealer increases it to 9 percent.
Over time, you pay more interest. The dealer earns more commission.
You are not told how or why the rate was set.
This is a typical example behind many DCA claims and PCP claims.
Example 2. Fixed Commission
The dealer gets a flat fee for arranging your finance.
They can't vary your interest rate.
If it's small, it's probably not going to make a difference to whether it's fair or not.
If it's big and undisclosed, it will be examined under FCA regs.
How This Affects Compensation and Payouts in 2026
There is strong interest in payouts 2026.
The FCA estimates average car finance compensation at around £830 [3], though this varies.
For undisclosed commission claims average payout figures can differ significantly depending on the structure of the agreement.
In general:
- Discretionary commission cases are more likely to result in compensation
- High commission cases may qualify depending on thresholds
- Lower commission cases are less likely to qualify
Each case is assessed individually.
What This Means For Your Claim
You do not need to understand every technical detail.
Your lender already has the information about your agreement.
What matters is taking the first step.
That means:
- Locating your agreement
- Locating your lender
- Verifying your eligibility
Following that it is possible for the circumstances of the case to be properly evaluated in line with FCA car finance rules.
Do You Need To Do Anything?
Yes. Whilst lenders should be making contact with customers, this may take some time.
If you do something now, you can:
- Make sure your agreement is spotted early
- Help avoid delays
- Know where you stand sooner
This is particularly important if your details have changed since the agreement was made.
A Practical Way To Move Forward
Start by locating your agreement.
This can be achieved via your credit report, your own records or with the help of finance claims experts or specialists.
When you have located your agreement, fill in a car finance refund check.
This will enable you to work out whether your agreement could potentially be within FCA criteria and what your next step could be.
FAQs
What is a discretionary commission arrangement?
It is a system that could allow a dealer to increase your interest rate and get more commission as a result. It is at the heart of many car finance claims.
What are DCA claims?
DCA claims are when agreements that used discretionary commission arrangements could have increased the cost of your finance.
What are undisclosed commission claims?
Undisclosed commission claims are when commission was not properly disclosed. They may be valid if the commission was high enough to create an unfairness.
Will all undisclosed commission claims be valid?
Not all. Only those that meet the FCA thresholds and where there’s an identifiable financial impact are likely to be valid.
How much can I claim for car finance?
The average car finance payout is £830, but the actual figure can vary.
Can I make a PCP claim?
Yes. Most PCP claims are covered by the FCA car finance investigation and may be valid where commission has affected the PCP agreement.
Can I claim with no paperwork?
Yes. We can locate your agreement using your personal details.
Where do I start?
Begin by locating your agreement, then fill out a car finance refund check to see where you stand.
Final Answer
Understanding commission doesn’t matter. You can move forward without knowing about commission.
The only thing that matters is that your agreement was in one of these groups. The majority will have discretionary commission under FCA car finance rules. This gives them the strongest mis-sold car finance claim. Fixed commission only applied in narrower circumstances. This can be the case if commission was high and undisclosed.
Identify if your agreement is one of these. Once you’ve done that you can move forward with confidence.
__________
References:
- Claims brought against car finance firms now mostly fall into 3 categories as per the recent FCA investigation into the topic - https://www.fca.org.uk/publication/consultation/cp25-27.pdf
- The FCA has certain criteria for when these undisclosed commission claims are valid - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
- The FCA estimates average car finance compensation at around £830 - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme