---
title: "How Discretionary Commission Models Worked (And Why They Were Banned)"
canonical: "https://carfinancerefundletter.co.uk/blog/how-discretionary-commission-models-worked"
date: "2025-11-27T09:00:00.000Z"
---
# How Discretionary Commission Models Worked (And Why They Were Banned)

_Published: November 27, 2025_ · _2 min read_

A deep dive into the mechanics of the 'Difference in Charges' model and why the FCA deemed it unfair to consumers.

**Canonical:** [HTML article](https://carfinancerefundletter.co.uk/blog/how-discretionary-commission-models-worked)

---

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.