Updated: 18 August 2025

Originally Published: 14 May 2025

Introduction: Why DCAs Are Back in the Spotlight

If you’ve taken out car finance in the past 15 years, there’s a real chance you could be owed money and not a small sum either. The UK’s car finance scandal has exposed a widespread practice where lenders and brokers pocketed extra commission by quietly raising interest rates for customers. Following the FCA car finance investigation findings, this practice, known as a Discretionary Commission Arrangement (DCA), was banned in January 2021Discretionary Commission Arrangement (DCA), was banned in January 2021 [1]. But for agreements signed before then, millions of drivers may now be entitled to car finance refunds or eligible for DCA compensation.

The scale of the issue is staggering. In August 2025, the Supreme Court’s rulingSupreme Court’s ruling [2] clarified part of the mis-selling problem, but the FCA’s primary focus, and the type of mis-selling expected to trigger mass payouts, remains DCA claims. With a redress scheme consultation scheduled for October 2025redress scheme consultation scheduled for October 2025 [3], this is the perfect time to understand your rights, eligibility, and how to make a DCA finance claim.

This guide covers:

• The main type of mis-selling under investigation
• A full car finance mis-selling timeline for DCAs
• Insights from finance claims experts and solicitors
• Practical advice on how to check car finance claim eligibility and start your case
• Step-by-step instructions on filing, appealing, and tracking your car finance claims

Understanding Discretionary Commission Arrangements

A discretionary commission arrangement is a car finance commission model where brokers, such as car dealers, could set your interest rate within a certain range. The more they raised the interest rate, the more commission they received from the lender.

This is how it worked in reality: A lender would give a base rate to the broker or dealer for the interest rate on a car loan. The broker or dealer would then mark up that rate (up to a certain amount) and the higher the rate the more commission they received.

Customers were often kept in the dark about this structure and as a result, they often ended up paying much more than they had to. For instance, a buyer may have qualified for a 5% rate given their credit profile. However, a DCA would jack up the rate to 8%, pocketing a much bigger commission and never disclosing this to the purchaser. It was common in both PCP (Personal Contract Purchase) and HP (Hire Purchase) deals.

The problem? Most customers had no idea this was happening, and there was no requirement for the broker to tell them. This created a serious conflict of interest: instead of finding the best deal for you, the broker had a financial incentive to make it worse.

For more background on how these arrangements worked and why they were banned, see our guide on discretionary commission agreements.

Why DCAs Were Problematic

Discretionary commission arrangements clearly presented a conflict of interest. Brokers were incentivised to charge higher rates, whether it was in the customer's best interest or not. Because of insufficient transparency, many car finance products were sold incorrectly since consumers assumed their interest rate would remain constant in line with their credit scores or lender standards.

Dealers can increase the rates they charge customers for no apparent reason or explanation. This arbitrary behaviour undermined consumer confidence and defied the basic principles of fairness in UK financial legislation.

In many cases, consumers were locked into long-term agreements with unnecessarily high repayment costs, simply because the dealer stood to gain more in commission. This is the foundation for thousands of DCA claims now being reviewed or filed across the country.

The widespread use of DCAs has had a long-term and deep impact on the UK car finance market. Hidden commissions have been in place for years, working to make millions of customers pay more on their borrowings and distort a market where competition should have been transparent.

Customers often had no choice but to take a higher rate of interest rather than getting the best deal suited to their credit score. Consumer trust in the dealerships and finance providers, and the motor finance industry as a whole, started to erode.

Consumer confidence decreased, leading to increased attention from regulators and consumer groups. DCA-related mis-selling continues to inflict financial and reputational damage while lenders address numerous claims and work to re-establish accountability within the sector.

FCA Action and Regulatory Changes

The Financial Conduct Authority (FCA) began reviewing DCA practices in detail after mounting concerns from consumer rights groups and financial regulators. The FCA formally banned discretionary commission models in the motor finance industry in January 2021.

The change was a positive step in the industry’s direction to clear and fair car finance agreements. Lenders were asked to set up flat commission models. This removes the broker’s ability to alter rates for their own gain.

The UK car finance industry experienced a fundamental transformation due to the FCA’s 2021 DCA ban which changed the structure of commission payments. The ban forced lenders and brokers to undertake a full transformation of their business methods. The ban required lenders to stop providing discretionary commissions to brokers and dealers while mandating them to establish fixed commissions for all participants. The elimination of discretionary commissions led to both lower interest rate inflation and a more balanced marketplace which provided customers transparent and competitive rates.

The ban was a relief to consumers, giving them greater protection against hidden charges and preventing brokers from changing interest rates for their own advantage. The ban also raised issues about how to deal with historic mis-selling. Consumers who were treated by DCAs prior to the ban coming into force are able to claim financial compensation. This is as they were unfairly charged and over-indebted.

The FCA’s review didn’t end there. The Authority started a comprehensive review of historic car finance agreements in early 2024 to determine if there was widespread mis-selling by lenders. A major policy update is expected by late 2025, which may include formal guidelines for compensation and lender responsibilities.

If you believe your finance was mis-sold, now is a good time to review your documents and consider a car finance DCA claim.

The Main Type of Car Finance Mis-Selling Under Scrutiny

While the Supreme Court ruling in August 2025 focused on commission disclosure complaints, finance claims experts stress that the primary mis-selling issue to watch is still DCAs.

Here’s why:

1. DCAs are separate from the Supreme Court case - The court mainly dealt with whether lenders had to disclose that commission was paid at all. Many of those claims were rejected, except in cases where the commission was extremely high and deemed unfair.
2. DCA-related claims remain the FCA’s main target - The regulator is preparing a redress scheme expected to include automatic car finance refunds for affected customers.
3. The impact is far wider - DCAs affected a far greater proportion of borrowers than the disclosure issue. This is why experts are urging people to prepare their car finance claims now.

If you think you were affected, start by using our car finance claims page or our dedicated PCP claims guide.

Car Finance Mis-Selling: A Brief Timeline on DCAs

January 2021

• FCA bans discretionary commission arrangements.
• Brokers can no longer set interest rates to increase their commission.

January 2024

• FCA launches its official investigation into DCAs.
• Lenders told to pause complaint handling until further notice.

March 2025

• FCA Confirms that a formal redress scheme will follow after the Supreme Court ruling.

August 2025

• FCA announces to launch a six-week public consultation on the redress scheme by early October.
• Expected to set out how much compensation will be paid and whether claims will be automatic or require opt-in action.

2026

• Anticipated start of redress scheme payouts.
• Estimates suggest average payouts could reach £950 per eligible agreement [4].

For the most up-to-date developments, see ourlatest updates on car finance claims page.

Why This Matters: Trust, Records, and Missing Paperwork

There was a recent survey conducted by Find Out Now for consumer law firm Slater & Gordon [5]. The Supreme Court recently ruled that around 14 million people were mis-sold car finance between 2007 and 2021. According to the poll, only 23% of people trust lenders to handle payouts fairly and lenders are already saying some records are missing or deleted.

That matters, because 57% of potential claimants have moved house since their finance deal, and over 8 million have lost paperwork. Some money experts are telling people to wait for the redress scheme. But for the 57% of people who’ve moved address, can’t find their paperwork, or simply don’t trust the same lender, a claims management company (CMC) can help. Acting sooner rather than later could be vital, especially if your lender no longer holds your data.

Who Might Have Used DCAs?

If you’re wondering Which car finance companies used DCA, the answer is: many of the UK’s largest lenders and dealer networks. The lending practices of Black Horse Finance and Close Brothers Finance along with multiple small lenders have connections to these models.

Black Horse Finance was amongst the leading motor finance providers in the UK and it was a division of the Lloyds Banking Group. Between 2015 and 2021, Black Horse engaged in DCAs, where brokers and dealers received commissions linked to the interest rates charged to consumers.

Black Horse has implemented proactive measures to handle the issue following the FCA's examination and the Court of Appeal decision from October 2024 that found undisclosed commissions illegal. It has placed £1.2 billion as provision for other sundry expenditure [6] including compensation to be paid to consumers. Black Horse shows its commitment to improve past business practices through this action while ensuring fair treatment for all customers.

The UK lender Close Brothers Finance also found itself entangled in DCA practices that allowed brokers and dealers to manipulate interest rates on car loans resulting in increased commissions for them but higher costs for consumers.

According to the court decision, lenders must obtain customer consent before they can pay car dealers commissions. Close Brothers allocated as much as £165 million for the legal and compensation expenses [7] resulting from the FCA probe.

If your agreement was arranged through a dealership, there’s a strong chance it was subject to a DCA, particularly if it was signed before January 2021. To begin your claim, gather up the original loan agreement and all related documents. The finance company has given customers the option to register complaints themselves, or to use the services of an expert claims handler to file a formal complaint.

How to Check Car Finance Claim Eligibility

Eligibility typically depends on:

• Date of your agreement (before January 2021)
• Type of finance (PCP or HP most likely to be affected)
• Interest rate charged compared to market rates at the time
• Evidence that a broker had discretion to set your rate

Don’t worry if you don’t have all the paperwork. The FCA and lenders can trace agreements from minimal personal details.

You can start the process directly with your lender or with a finance claims expert like Reclaim247. See our DCA compensation page for details.

How to File a Claim for Discretionary Commission Arrangements

If you decide to go ahead:

1. Contact your lender

Ask both the broker and lender an immediate claim filing process. State clearly that you believe your finance included a discretionary commission arrangement and demand full disclosure of all the commission arrangements. Lenders do create voluntary settlement procedures for DCA claims when they have already compensation funds available.

1. Submit your claim

After you've reached out to your lender, it's now time to make your formal claim. This will typically mean completing a claim form and including the supporting documents that are applicable. Make sure you clearly explain how the DCA affected your car finance agreement, such as how it resulted in increased interest rates or additional charges.

1. Wait for a decision

The eight-week deadline for lenders to address motor finance complaints involving DCAs stands in suspension at this time. The FCA decided to continue extending the current suspension of the deadline for lenders to reply to motor finance complaints handled through DCAs until 4 December 2025suspension of the deadline for lenders to reply to motor finance complaints handled through DCAs until 4 December 2025 [8]. When a lender declines communication, you can submit the case to the Financial Ombudsman Service to get additional review.

1. Consider using a solicitor or claims service

You should consider hiring a claims service if the claims process feels too complex or time-consuming. Reclaim247 and similar companies manage DCA claims through evidence collection and lender correspondence while submitting proper complaints. These services charge for their work yet they help clients save time and improve their chances of winning the case especially when legal details or expert financial document understanding is needed.

When it comes to reclaiming refunds on car finance deals, clients of Reclaim247 have access to ethical claim handling and personalised support. The team of expert professionals specialising in motor finance mis-selling steers clients towards a successful remedy to an often daunting official complaints process. Handling every step of the claim on your behalf from reclaiming documentation to negotiating directly with lenders, the professionals will keep you updated throughout the process. This ensures your case is built with strong supporting evidence to stand up under scrutiny.

Reclaim247 operates on a "no win, no fee" basis whereby the clients only pay once their claim has been won. This consumer-friendly approach thus reduces risks and barriers to securing compensation for people. Through Reclaim247, you receive the peace of mind that comes from working with seasoned experts who ensure drivers receive fair treatment throughout the UK. 

How to Appeal Discretionary Commission Claim Decisions

Do not stop pursuing your claim if it has been rejected or undervalued. You have the right to appeal. Below are the steps to follow.

• Check the reason for refusal. Some rejections are based on technicalities or incomplete information. Examine the lender’s explanation with care to determine the reason behind your claim denial. The denial could be a result of missing documents with inconclusive evidence and misinterpretation of the contract terms. Your appeal is more powerful after you correct the original submission errors, once you determine why your claim was denied.
• Request a subject access request (SAR). The request gives you complete access to your lender's data related to your finance agreement. Through a SAR, you can access all personal data that the lender maintains about you which includes internal notes, communications with you as well as the specifics of your finance agreement setup. The information reveals whether a discretionary commission occurred and clarifies its impact on your interest rate. Unrevealed pertinent information from your lender could serve as crucial evidence during your appeal process.
• Submit an appeal to the FOS. Provide as much evidence as possible, including how the commission impacted your financial terms. If the responses from the lenders do not reach your satisfaction standards, you may need to resort to appealing directly to the FOS. Your appeal document should describe detailed accounts of complaint with all documentation and facts including how you might have been deceived in payment amount by the respective hidden commission setup. The Financial Ombudsman Service evaluates the lender's conduct to determine fairness and can mandate compensation when it discovers a consumer experienced misleading treatment.

Common Pitfalls to Avoid

• Delaying action – Waiting for the FCA’s scheme may mean missing deadlines or losing contact details.
• Using high-fee claims firms – Some take a large percentage of your payout.
• Falling for scams – Fraudsters are targeting people expecting compensation. Always verify who you’re dealing with.

FAQs

Do I need my car registration or finance paperwork to claim?

No. Most lenders can locate your agreement from your personal details.

What if my lender has gone out of business?

The FCA’s redress scheme is expected to address claims even where the lender no longer operates.

Will claims be automatic?

The FCA consultation in October 2025 will decide if claims are automatic or require an opt-in.

How much compensation could I get?

It depends on how much extra interest you paid, but average payouts could be around £950.

Related Guides from Reclaim247

Want to learn more? Recommended reading from Reclaim247.co.uk:

• Why the FCA Took Action Against Discretionary Commission Arrangements
• Discretionary Commission Arrangements Explained: Compensation and Calculations
• Discretionary vs Fixed Undisclosed Commissions: Key Differences for Car Finance Claims

These provide a deeper dive into the FCA’s legal grounds for the ban, how compensation is calculated and more if you make a claim.

Conclusion: Act Now, Stay Informed

The car finance scandal has left millions entitled to refunds, with DCA claims at the centre of the FCA’s investigation. If you decide to claim now, or wait for the official scheme, the most important thing is to be informed and organised with your information.

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1. Discretionary Commission Arrangement (DCA), was banned in January 2021 - https://www.fca.org.uk/news/press-releases/fca-ban-motor-finance-discretionary-commission-models
2. Supreme Court’s ruling - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
3. redress scheme consultation scheduled for October 2025 - https://www.fca.org.uk/news/statements/fca-consult-compensation-scheme-motor-finance-customers
4. average payouts could reach £950 per eligible agreement - https://www.theguardian.com/business/2025/aug/04/who-will-get-car-loan-payout-how-much-regulator
5. recent survey conducted by Find Out Now for consumer law firm Slater & Gordon - https://www.slatergordon.co.uk/newsroom/consumers-trust-the-financial-conduct-authority-to-resolve-the-car-finance/
6. £1.2 billion as provision for other sundry expenditure placed by Black Horse - https://www.bbc.com/news/articles/cj0q422mn70o
7. Close Brothers allocated as much as £165 million for the legal and compensation expenses - https://www.standard.co.uk/news/uk/close-brothers-brothers-lloyds-banking-group-financial-conduct-authority-court-of-appeal-b1210611.html 
8. suspension of the deadline for lenders to reply to motor finance complaints handled through DCAs until 4 December 2025 - https://www.fca.org.uk/news/statements/extension-motor-finance-complaint-handling-pause-confirmed