The FCA Motor Finance Review Explained
The Financial Conduct Authority (FCA) has been conducting a major review into how motor finance commissions were handled across the UK. This review has significant implications for anyone who has ever taken out car finance.
In January 2021, the FCA banned a practice known as discretionary commission arrangements (DCAs). Under these arrangements, car dealers had the freedom to set — and increase — the interest rate on your finance agreement, directly boosting their own commission in the process.
What Were Discretionary Commission Arrangements?
Before the ban, there were several types of commission models used in motor finance:
- Increasing DCA: The dealer could increase your interest rate to earn more commission.
- Reducing DCA: The dealer earned more commission by reducing the rate (less common).
- Scaled commission: Commission was linked to the amount borrowed.
The most problematic was the increasing DCA model, where the dealer was financially incentivised to charge you a higher rate.
How Many People Were Affected?
The FCA estimates that the use of discretionary commissions may have led to overcharging on a massive scale. Research suggests:
- Approximately 560,000 customers per year may have been affected
- The average overpayment could be around £1,100 per customer
- Total compensation across the industry could reach billions of pounds
What Has the FCA Done?
The FCA has taken several steps:
- Banned DCAs from January 2021 onwards
- Launched a review into historical commission arrangements
- Required lenders to handle complaints fairly
- Set out expectations for how firms should treat customers who were affected
What Does This Mean for You?
If you took out car finance before January 2021, there is a strong possibility that a discretionary commission was applied to your agreement. This means:
- You may have paid a higher interest rate than necessary
- You could be entitled to a refund of the overpaid amount
- You do not need to have the car or the finance agreement still active
The FCA review strengthens the case for PCP claims. If a hidden commission was applied to your agreement, you have every right to seek compensation.
Should You Wait for the FCA Review to Conclude?
While the FCA review is ongoing, there is no reason to wait before submitting your claim. In fact, acting sooner is advisable because:
- Processing times can be lengthy
- There may be future deadlines imposed
- Getting your claim in early means you are in the queue
How to Check If You Were Affected
The simplest way to find out if you were affected is to check your eligibility with us. Our free assessment will determine whether a hidden commission was likely applied to your agreement and whether you have grounds for a claim.
Start your free eligibility check — it takes less than two minutes.