Discretionary Commission Arrangements (DCAs): What You Need to Know

Discretionary Commission Arrangements (DCAs): What You Need to Know

If you bought a car in the UK through PCP (Personal Contract Purchase) or HP (Hire Purchase) finance between 2007 and January 2021, chances are you might have paid more than necessary — without even knowing it.

Why? Because of Discretionary Commission Arrangements (DCAs).

This hidden industry practice allowed brokers and car dealers to earn higher commissions by increasing your interest rate, often without your knowledge or consent. It resulted in millions of drivers being mis-sold car finance — a practice that the Financial Conduct Authority (FCA) officially banned in 2021.

In this guide, we’ll explain:

• What DCAs are and how they work
• How they affected your car finance payments
• How the FCA responded
• What you can do to reclaim overpaid interest
• How PCP Recovery helps you file a successful claim

What Is a Discretionary Commission Arrangement (DCA)?

A Discretionary Commission Arrangement is an agreement between a car finance lender and a dealer or broker, giving the broker the ability to adjust the interest rate charged to the customer.

In simple terms: the higher your interest rate, the more money the dealer made.

This was never clearly explained to buyers. Most customers assumed they were getting a fair market rate, unaware that a large chunk of what they were paying was influenced by the broker’s incentive to profit, not the lender's base rate or market conditions.

Example of a Mis-Sold Finance Agreement Using a DCA

Let’s break this down with a real-world scenario:

• Car price: £15,000
• Term: 48 months
• Base interest rate: 6%
• Dealer-set interest rate: 10%
• Undisclosed commission: £1,200+

As a result, the buyer ends up paying £1,000+ more than they would have, just because the broker raised the interest rate to receive more commission.

That’s the power of a DCA — and the reason it’s now banned.

What Did the FCA Ban in 2021?

In January 2021, the FCA prohibited DCAs in motor finance. Their investigation found that brokers had:

• Too much discretion in setting interest rates
• Financial incentives to increase costs for customers
• Failed to disclose commissions clearly or at all

The ban applies to all new agreements from 28 January 2021 onwards.

But what about existing deals? The FCA left the door open for claims and redress — and that's where you come in.

How DCAs Affected Millions of UK Car Buyers

According to FCA data:

• 40% of car finance agreements between 2007–2021 likely included DCAs
• Thousands of brokers inflated interest rates to increase their commission
• Most consumers were never told about these arrangements

This means that if you financed a car during that period, you may be owed a refund of £500–£2,000 or more.

Are You Owed Compensation?

You may be eligible for compensation if:

• You took out a PCP or HP agreement between 2007–2021
• The broker/dealer didn’t disclose the commission
• You feel the interest rate was unusually high
• You’ve completed or are still paying the finance

Even if you no longer have the car, you can still claim.

Why This Matters: The Bigger Picture of Mis-Sold Finance

Discretionary Commission Arrangements are now considered a form of mis-sold car finance. That means:

• The loan was not sold in your best interest
• Your agreement may be legally unenforceable
• You may be due financial redress, plus interest

Think of it like PPI for car finance — a widespread issue now being resolved.

How to Check for DCAs in Your Finance Agreement

You may not have direct evidence of a DCA — and that’s okay. At PCP Recovery, we’re equipped with the tools to help:

• Retrieve your old car finance agreement (even if lost)
• Analyze the interest structure
• Compare your deal to standard lender rates
• Build a legal case with partner solicitors

Even if your agreement looks “normal,” hidden commissions can still exist.

Our Claim Management Workflow

Here’s how we make the process easy and risk-free:

Step 1: Free Claim Check

Start by answering a few questions using our free online checker.

Step 2: We Locate Your Finance Agreement

No paperwork? No problem. We contact lenders using your name, car registration, or address.

Step 3: We Audit Your Agreement

We use industry tools to identify inflated interest rates and commission markups.

Step 4: We Prepare and Submit Your Claim

Our legal partners handle communications with the lender, ensuring compliance with FCA guidelines.

Step 5: Receive Your Compensation

If successful, you’ll receive a refund of overpaid interest—minus our fee, only if we win.

Case Study: Lisa's Hidden Commission Refund

Lisa G., Sheffield
“I bought my car in 2015 with a 9.8% APR. I assumed it was normal, but it turns out the dealer added a 3% markup for commission. PCP Recovery helped me get back £1,140 within 10 weeks—without me having to lift a finger.”

We’ve helped thousands just like Lisa—and we can help you too.