What is a DCA, and how do I know if I had one?

The Financial Conduct Authority’s (FCA) car finance redress proposals cite discretionary commission arrangements (DCAs) as the mechanism most responsible for car finance mis-selling in the UK, stating that out of an estimated 14.2 million agreements taken out between 6 April 2007 and 1 November 2024 on which compensation is due, 11.4 million of them involved a DCA.

What is a DCA?

The FCA Handbook defines a DCA as:

‘any arrangement under which:

1. a lender permits a credit broker to decide or negotiate (whether or not within specified limits or subject to conditions or restrictions) the amount of any item included in the total charge for credit provided for in a regulated credit agreement in respect of which the credit broker carries on activity of the kind specified in article 36A of the Regulated Activities Order; and
2. the amount of any commission, fee or other financial consideration payable to the credit broker (directly or indirectly) in connection with that regulated credit agreement is affected (in whole or part) by the amount referred to in (a).’

Why are DCAs central to car finance mis-selling?

The FCA launched a formal investigation into car finance mis-selling and the historical use of DCAs on 11 January 2024, pausing complaint handling in relation to DCAs at the same time. As of November 2025, that pause remains in place until 4 December 2025; the regulator is likely to extend this to 31 July 2026 to align with the publishing of its final redress rules, which it says it is aiming to do by February or March 2026, and the likely commencement of its redress scheme.

How did DCAs harm consumers?

To simplify the FCA definition above: DCAs allowed your car dealer, acting in the capacity of a broker, to set or influence the interest rate they offered you on your car finance agreement, with their commission increasing if you took out an agreement with a higher rate. This created a conflict of interest, as the DCA incentivised your car dealer to encourage or push you to agree to a higher rate.

Subsequently, mis-selling occurred because your car dealer almost certainly did not disclose that they would receive a commission, how much commission they would receive, or that they had been able to set your interest rate. This, therefore, limited your ability to negotiate the deal, explore a less expensive financing option, or withdraw from the purchase entirely.

What impact would a DCA have had on my car finance agreement?

In simple terms, if your car dealer had a DCA in place with your lender and used that to inflate your interest rate, you potentially paid hundreds or even thousands of pounds more over the course of your car finance agreement than you otherwise would have paid.

Under the regulator’s redress proposals, that means you could be due several thousand pounds in car finance mis-selling redress if you had multiple car finance agreements with DCAs that you took out between 6 April 2007 and 28 January 2021.

Why are 6 April 2007 and 28 January 2021 significant?

6 April 2007 is the date on which the Financial Ombudsman Service (FOS) took over jurisdiction of the consumer credit industry, including car finance dealers and brokers. This means that 6 April 2007 is the earliest date from which FOS and the courts can consider complaints about mis-sold car finance. Note that the FCA did not take over regulation of the entire UK consumer credit market, again including car finance, until 1 April 2014.

28 January 2021 is the date the regulator banned DCAs, having confirmed it would do so in July 2020. While the ban became effective from 28 January 2021, in practice, the use of DCAs had fallen dramatically before this date, following the FCA's work in the motor finance sector.

If DCAs were banned in January 2021, why can I claim redress for agreements up to 1 November 2024?

DCA-related claims are only one aspect of the regulator’s proposed redress scheme, and the FCA is concerned that mis-selling practices via other means continued post-28 January 2021.

The other types of mis-selling covered by the FCA’s redress proposals are:

• Excessive commissions, which the regulator has defined as commission that comprises 35% or more of the total cost of credit and 10% or more of the total loan amount.
• Contractual ties, or ‘tied agreements,’ which typically meant consumers only had the ‘choice’ of receiving credit from one lender or were pushed towards a specific lender by their car dealer acting as a broker.

That means that if you had a car finance agreement that was subject to a DCA before 28 January 2021, or involved excessive commissions or a tied agreement before or after this date and before 1 November 2024, you could bring claims on each of these grounds.

How do I know if I had a DCA?

If you took out a car finance agreement between 6 April 2007 and 28 January 2021, and it does not clearly state whether your agreement involved a DCA, you should contact your lender(s), who are obliged to inform you if your agreement included a DCA and whether the person acting as the broker disclosed it at the time of the purchase or not.

One barrier you may face if your car finance agreement(s) concluded more than six years ago is that your lender(s) may no longer hold your records. If you are in this situation, instructing a solicitor to manage your car finance mis-selling claim means they can investigate your historical agreements, identify the lenders, and discover this information on your behalf. They may also be able to argue what the DCA position is likely to have been by reference to the experience of other clients.

How much compensation may I receive if I had a DCA?

On page 271 of its redress scheme consultation paper, the FCA estimates the average redress per car finance agreement involving the inadequate disclosure of a DCA will be £665.62.

In contrast, the regulator estimates that the average redress for inadequate disclosure of high commission and tied arrangements will be £1,108.35 and £686.18, respectively.

One of our most significant concerns with the FCA’s proposals is that lenders may be left to calculate your redress payment free of scrutiny or accountability, and may try to pay you an average or estimate that does not reflect your actual loss. This is another aspect of your car finance claim in which instructing a solicitor may be beneficial.

When will I get my car finance compensation?

Based on the FCA’s current timeline and its intention to publish its final redress scheme rules in February or March 2026, we anticipate that car finance compensation payments will commence in mid-2026.

The pace at which you receive your compensation will depend on whether you have already complained to your lender(s) or not. The regulator’s proposals call for lenders to write to customers who have already complained within three months of the scheme’s start, and to all other affected customers within six months. That means that you are likely to receive any compensation that you are due sooner if you have already made a complaint.

Can I bring a car finance claim on other grounds?

As well as bringing a DCA complaint for any eligible car finance agreements entered into between 6 April 2007 and 28 January 2021, you may also be able to bring claims on the grounds of excessive commissions or tied agreements for agreements entered into between 6 April 2007 and 1 November 2024, as discussed above.

If you instruct a solicitor to pursue your car finance claim on your behalf, their investigations may also uncover if you are eligible for a higher rate of compensatory interest or can bring additional claims for mis-sold GAP insurance, mis-sold cosmetic, alloy and tyre damage insurance, or even an irresponsible lending claim against your lender.

How can I start my car finance claim?

You can register your car finance claim with Harcus Parker here.