How DCAs Worked in Car Finance
When a lender provided car finance through a dealership, the arrangement typically worked like this:
The lender set a minimum interest rate — the lowest rate they were willing to accept for a given customer. But instead of passing this rate directly to the customer, the lender gave the dealer discretion to increase the rate up to a set maximum.
Crucially, the dealer's commission was directly linked to the rate they charged. The higher the interest rate set by the dealer, the more commission the lender paid them. This meant dealers had a strong financial incentive to charge customers as much as possible, rather than offering the most competitive rate available.
Customers were almost never told this arrangement existed.
Why DCAs Were a Problem for Consumers
The FCA concluded that discretionary commission arrangements created an unacceptable conflict of interest. The key problems were:
- Dealers acted as credit brokers on behalf of customers — meaning they were supposed to act in the customer's best interests
- At the same time, dealers were financially rewarded for charging customers higher rates
- Customers were not told about the commission arrangement or given a chance to negotiate
- The result was that millions of UK drivers paid more interest than they needed to, with the excess going to the dealer as commission
The FCA found this practice caused significant harm to consumers across the UK motor finance market.
When Were DCAs Banned?
The FCA banned discretionary commission arrangements in January 2021. From that point, lenders were no longer permitted to offer dealers commission arrangements linked to the interest rate charged to customers.
The ban followed an FCA review that found DCAs were widespread across the UK car finance industry and were causing consistent harm to consumers.
Which Lenders Used DCAs?
DCAs were widespread across the UK car finance market between 2007 and 2021. Major lenders known to have used DCA arrangements include:
- Black Horse Finance (Lloyds Banking Group)
- Santander Consumer Finance
- Close Brothers Motor Finance
- MotoNovo Finance
- Barclays Partner Finance
- PSA Finance UK
- Volkswagen Financial Services
- BMW Financial Services / Alphera Financial Services
- Ford Credit
- Moneybarn
- Hitachi Capital (now Novuna)
What the FCA Investigation Found
The FCA launched a formal investigation into motor finance discretionary commission arrangements in January 2024. Key findings include:
- DCAs were used extensively across the UK car finance market from 2007 until the ban in January 2021
- Millions of consumers were affected — the FCA estimates approximately 14 million car finance agreements may be in scope
- The average compensation per affected agreement is estimated at approximately £700
- The total industry compensation bill is estimated at £8.2 billion, with some analysts suggesting it could reach £11–13 billion
How Much Compensation Could You Receive?
The amount of compensation you could receive depends on several factors:
- The size of your car finance loan
- The interest rate you were charged
- The interest rate you should have been charged without the DCA
- The length of your finance agreement
The FCA estimates the average claim value is approximately £700, though individual claims may be higher or lower. Use our car finance claim calculator for a personalised estimate based on your agreement details.
How to Make a DCA Car Finance Claim
- Check your eligibility — use our free claim check tool to assess whether your agreement is in scope
- Gather your details — lender name, vehicle purchase date, finance type, and monthly payment if available
- Submit your claim — an FCA-authorised specialist will review your case
- Wait for assessment — the specialist will contact your lender and the Financial Ombudsman if required
- Receive compensation — if successful, payment is made directly to you
Most DCA claims are handled on a no-win, no-fee basis.
Frequently Asked Questions
What does DCA stand for in car finance?
DCA stands for discretionary commission arrangement. It was a system used by car finance lenders that gave dealers the power to set and increase customer interest rates, with their commission linked to the rate charged. The practice was banned by the FCA in January 2021.
How do I know if my agreement included a DCA?
If you bought a car on finance through a dealership between January 2007 and January 2021, your agreement may have included a DCA. The most reliable way to check is to request a copy of your original credit agreement from your lender and look for mention of "discretionary" or "variable" commission.
Can I claim compensation for a DCA even if my finance is paid off?
Yes. Whether your finance is fully paid off, still active, or was settled early, you may still be eligible to claim. Eligibility is based on whether a DCA was in place when the agreement was signed, not whether the finance is ongoing.
Is there a time limit on DCA car finance claims?
The FCA has established deadlines for lenders to handle DCA complaints as part of the industry-wide compensation scheme. It is advisable to submit your details as soon as possible to ensure your claim is included.
Do I need a solicitor to make a DCA claim?
No. You can use our free claim check tool to assess eligibility. If you proceed, an FCA-authorised claims specialist will handle your case, typically on a no-win, no-fee basis.