How Discretionary Commission Models Worked (And Why They Were Banned)
A deep dive into the mechanics of the 'Difference in Charges' model and why the FCA deemed it unfair to consumers.
To understand why you are owed money, you need to understand the mechanism of the rip-off. It wasn't just "high commission"; it was linked commission.
The "Difference in Charges" (DiC) Model
This was the most common type of DCA.
- The lender sets a Base Rate (e.g., 3%). This is the minimum return they need for the risk.
- The dealer is allowed to sell the finance at any rate above that base rate.
- The Kicker: The dealer keeps the majority of the difference.
If they sold it to you at 3%, they got a small flat fee.
If they sold it to you at 10%, they got a huge commission cheque.
The Conflict of Interest
This model destroyed the duty of care. A dealer acting in your best interest should find you the cheapest rate. Under DiC, they were financially incentivised to find you the most expensive rate you would agree to.
The Ban
In January 2021, the FCA banned this specific link. Dealers can still earn commission, but it must be a fixed fee or percentage that doesn't change based on the interest rate. This removes the incentive to overcharge.
The Car Finance Refund Team
A collective of consumer rights advocates, legal researchers, and software engineers dedicated to helping UK drivers reclaim unfair car finance commissions.
Disclaimer: This content is for informational purposes only and does not constitute legal or financial advice.
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