How Discretionary Commission Arrangements Worked in Car Finance

A discretionary commission arrangement, usually shortened to DCA, linked the broker's payment to the interest rate on a car finance agreement. Understanding that link helps you ask useful questions about an older agreement. It does not, by itself, tell you whether compensation is due.

The lender, broker and customer

The lender provides the finance. A dealer or broker introduces the customer and may receive commission from the lender. Under a DCA, the broker could influence the interest rate and its commission depended on that rate. This created a conflict between finding an affordable deal for the customer and earning more from arranging it.

The FCA's CONC 4.5 rules describe several models: commission based on a difference from a minimum or maximum rate, and models with payments varying across rate bands. It is therefore inaccurate to assume every lender used one identical formula.

What changed in January 2021?

The FCA banned discretionary commission models from 28 January 2021. Its PS20/8 policy statement explains the conflict of interest and the associated disclosure changes.

Commission itself was not abolished. The Financial Ombudsman Service distinguishes DCAs from fixed commission based on borrowing and flat fees for arranging agreements.

Why your APR is not a commission receipt

The amount you borrowed, repayments and interest charges describe your finance costs. They do not reveal the lender's separate payment to the broker. Multiplying a guessed interest-rate uplift by your loan balance and term cannot establish the actual commission or a guaranteed refund.

For illustration only, a broker might earn different amounts at two permitted interest rates. That shows the incentive; without the contract and commission records, it says nothing reliable about the amount paid on your agreement.

What to ask your lender

Ask it to identify the agreement, explain the commission arrangement and amount, and say what information was disclosed when you signed. Include the documents you have and be clear about facts you cannot remember. You can adapt our free complaint template.

A DCA enquiry is one part of the wider complaints landscape. The current scheme policy and our timetable guide explain why historical examples should not be treated as a promise of today's outcome. Checked on 28 October 2026.