Discretionary Commission Arrangements Explained in Plain English
Discretionary Commission Arrangements sit at the heart of the FCA's motor finance investigation. Here is what they are and why regulators consider them a problem.
10 April 2026 · 6 min read
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The phrase ‘Discretionary Commission Arrangement’ appears in nearly every article about mis-sold motor finance. What does it actually mean, and why does it matter to drivers?
The basic idea
When you financed a car through a dealership before 2021, the dealer often had the ability to adjust the interest rate you were charged within a range set by the lender. The higher the rate they set, the larger their commission.
Why the FCA took action
The regulator concluded that this created a clear conflict of interest: the person selling you the finance had a direct financial incentive to charge you more. In January 2021 the FCA banned Discretionary Commission Arrangements in motor finance. Agreements from before the ban are what the current redress work is focused on.
What was rarely disclosed
- That the dealer, not just the lender, was influencing the interest rate
- The size of the commission the dealer received
- That a lower rate may have been available from the same lender
- That the dealer had a financial incentive to place you on a higher rate
What this means for your case
If your agreement was subject to a DCA, you may be entitled to complain and, if upheld, receive redress. The lender has to look at the facts of your specific deal — the commission paid, the rate you were charged, and whether the arrangement was properly disclosed.
Curious whether your agreement involved a DCA? Start with our eligibility check.
Check my eligibility — freeThe FCA's Motor Finance Redress Scheme covers regulated motor-finance agreements between 6 April 2007 and 1 November 2024. Outcomes depend on the individual facts of each agreement and are not guaranteed. For official guidance visit the Financial Conduct Authority and the Financial Ombudsman Service.