Discretionary Commission claims: What’s the latest?

In this article, we’ll tell you what’s going on and what’s coming up, so you know what these claims and complaints are about, whether you’re eligible to make a complaint, and who to complain to. The investigation into car finance commission rates is ongoing, so we’ll keep this article updated with the latest information – that way you know what’s going on at all times.

The FCA are still investigating whether some car finance customers were charged too much through a Discretionary Commission Agreement (DCA).
This investigation has taken longer than expected, and has faced a legal challenge, so the FCA plans to set out their findings and next steps in May 2025. As part of this investigation, three consumers have argued that the car dealers, acting as brokers, failed to disclose commission payments and that affected the impartiality of the finance advice they gave. The Court of Appeal reviewed and ruled in favour of the consumers. The Court of Appeal’s decision could set a new legal standard for disclosure, with finance agreements requiring more transparency about commissions from here on out. You can learn more about this in our article. In response to the recent Court of Appeal judgment regarding motor finance commissions, the UK Financial Conduct Authority (FCA) is consulting on extending the time for firms to respond to consumer complaints where non-discretionary commissions were involved. Additionally, the FCA’s ongoing review of historical DCAs in motor finance is evaluating possible misconduct before the 2021 ban and whether consumer compensation is needed. This review's timeline and focus will be influenced by future court decisions.

If you have already made a complaint, know that finance firms will not have to issue a final response to any DCA complaints until after 4 December 2025 at the earliest.
The FCA are exploring whether providers should handle these complaints in their usual way or introduce a different approach. Introducing a different approach could take time, which is why they have introduced a new deadline of 4 December 2025. If complaints are handled the usual way, the deadline may be brought forward – we will let you know if this is the case. If you haven’t made a complaint and feel you have a case, you can still complain – providers now have longer to respond. The FCA have also suggested consumers are given an extended time frame to refer their complaint to the Financial Ombudsman. Consumers usually have six months, but the FCA are recommending the deadline be extended further to July 29, 2026, or 15 months after the last letter from the provider. This is so consumers won’t have to make an uninformed decision before any next steps are announced.

It’s estimated that over 90 per cent of new cars are bought on finance in the UK.
Generally, somebody would arrange that finance loan for you – for example, a car retailer. This person is called the broker. The body loaning the money, for example a bank, is called the lender. The Financial Conduct Authority (FCA) estimates that up to 95 per cent of those car finance deals have some form of commission model for the broker - so that they could earn money from making the sale. Commission models are common, still in use, and not inherently wrong. But, before January 2021, some lenders allowed brokers to adjust the interest rates they offered customers for car finance. Under this system, the broker would get more commission for charging you a higher interest rate. This was called a discretionary commission arrangement. At its worst, this meant brokers could adjust your interest rates so that they earned more commission when rates were higher. Discretionary commission arrangements were banned in 2021, but many drivers who took out car finance before then may have been affected, and a “high number” have complained that they were overcharged before the ban.

The FCA are investigating a number of car finance arrangements after receiving complaints that drivers may have been charged too much.
At the end of 2023, the Financial Ombudsman Service (FOS) said that it had received complaints from more than 10,000 people, who think they were charged too much for their car finance under the discretionary commission arrangement. Lenders and brokers have responded, saying they don’t believe they acted unfairly. Given the number of complaints and potential scale of the issue, the FCA then stepped in the examine the issue and review “historical motor finance commission arrangements and sales across several firms”.

The Financial Conduct Authority (FCA) is a financial regulatory body and conduct regulator for financial services firms and markets in the UK. They are investigating the issue using powers under the Financial Services and Markets Act 2000.
The FCA will tell lenders and brokers how to handle these complaints. While they investigate, lenders don’t need to reply to new complaints. The investigation could last until May 2025, so you should still lodge a complaint if you think it applies – we’ll cover the process below. If the FCA does find evidence of “widespread misconduct” and that consumers have lost out financially, they will work out how to compensate people “in an orderly, consistent and efficient way”.

The FCA says you may be affected if you used car finance (for example, hire purchase or PCP) to fund a vehicle purchase before 28 January 2021 and there was a discretionary commission arrangement between your lender and broker.
If you don’t know whether your broker and lender had a discretionary commission arrangement, or how much commission was taken, you can contact them to ask. Remember, they don’t have to reply to complaints while the FCA’s investigation is underway, but they should be able to answer queries. If you think the above applies to you and you may have been overcharged, it’s worth complaining to the lender or broker that sold you a vehicle on car finance as soon as possible. This doesn’t guarantee an outcome. If you applied for car finance on or after 28 January 2021, or you used an agreement like a car lease, then you won’t be affected by discretionary commission arrangements.

If you feel you were unfairly charged under the discretionary commission arrangement, you’ll need to contact the firm that sold your car finance.
There is normally an eight-week deadline for providers to get back to you, but the FCA has extended this as part of their investigation, so providers won’t have to respond to a complaint about this sort of car finance arrangement until after 4 December 2025 - at the earliest. That doesn’t mean you shouldn’t investigate and complain though – they will have to get back to you at some point. If a response to your complaint is likely to be delayed by the FCA’s investigation, the provider must tell you. If you’re not satisfied with their final response, you can escalate your complaint to the Financial Ombudsman Service (FOS). There is usually a six-month deadline for filing complaints to the FOS, but this has been extended to up to 15 months for responses received between July 12, 2023, and November 20, 2024. On 30 July, the FCA recommended the deadline be extended further to July 29, 2026, or 15 months after the final response letter from the provider. So even though you’ll have to wait longer for a response from your provider, you’ll have longer to file your complaint to the FOS. Make sure you keep a record of any complaints you make, as this could be helpful for keeping track of what has been said and what you do next. The FCA have confirmed that you won’t be ‘blacklisted’ by a company for submitting a claim. No claims will be included in application assessments for future products either.

The FCA’s investigation is still ongoing and no confirmation is expected until May 2025, so it’s currently unclear who will be eligible for compensation, how much affected consumers could receive in compensation, or whether the FCA will order firms to pay compensation at all.

Car finance is still available while this investigation is ongoing.
You may find brokers (retailers) advise you that they will receive commission, but remember, this is a common and legal way for brokers to make a living and, while discretionary commission arrangements have been banned, the FCA’s ban doesn’t cover all types of commission. Under the new rules, the retailer (acting as a broker) must confirm you’re paying commission. You’re well within your rights to ask how commission affects the final amount you pay. Whenever you look at a finance plan, you should make sure you can afford the monthly repayments and that you read and understand the terms and conditions. Take your time to research the types of finance available, how much you’d have to pay and when by, plus what would happen if you fell behind with payments. Ask the retailer any questions you have, and don’t rush into a decision.

Currently it is expected the recent court judgement will be appealed in the Supreme Court. In the meantime while the future is uncertain, you may find you are provided with more information regarding any commission or payments retailers or brokers involved in vehicle finance receive in order to help you make an informed decision.

This issue affects any circumstance where finance, through a broker or dealer, that has a discretionary commission arrangement included in the contract has been used to acquire vehicles such as cars, vans, camper vans and motorbikes between 2007 and 2021.