What are my options if my lender says there was no discretionary commission arrangement on my PCP agreement?
If your lender says there was no discretionary commission arrangement (DCA) on your PCP agreement, that does not automatically mean you are not eligible for compensation.
The FCA’s redress scheme also looks at other commission structures and certain contractual ties between dealerships, brokers and lenders.
If you think your lender has reached the wrong decision, you can ask them to review it and may be able to take your complaint to the Financial Ombudsman Service.
If you complained about your PCP finance and received a response saying “there was no discretionary commission arrangement”, you might assume that is the end of your claim. The good news is that isn't necessarily the case.
DCAs were the original focus of the car finance investigation, but the FCA’s redress scheme now covers more than one type of potentially unfair commission arrangement.
So, if your lender has only told you that there was no DCA, the next question is whether they have also looked at the other ways your finance agreement could fall within the scheme.
Does having no DCA mean I cannot make a PCP claim?
No, not necessarily. A DCA is only one of the unfair features covered by the FCA’s current motor finance redress scheme.
A discretionary commission arrangement allowed a dealer or broker to influence the interest rate a customer was charged in a way that increased the commission they received.
However, the FCA’s scheme also covers some agreements involving unfairly high commission and contractual ties.
This means your lender confirming there was no DCA does not automatically tell you that the agreement falls outside the redress scheme.
If you want a more in-depth explanation of what makes an agreement potentially eligible, our guide on how to know if you were mis-sold car finance explains what to look out for.
What else should my lender be checking?
Your lender should also be checking whether your agreement involved an unfairly high commission arrangement or a contractual tie covered by the FCA’s scheme.
There are currently three main features that can make an agreement potentially eligible:
A discretionary commission arrangement
An unfairly high commission arrangement
A contractual tie between the broker or dealership and lender
So, a response that only says “your agreement did not contain a DCA” does not necessarily answer the question of whether your agreement falls within the redress scheme.
It is worth reading the lender’s response carefully to see whether it has considered all three.
What is an unfairly high commission arrangement?
An unfairly high commission arrangement is where the commission paid to the dealer or broker was higher than the FCA’s high-commission thresholds and the arrangement was not properly explained to you.
Under the FCA’s current rules, a high commission arrangement is one where the commission was at least:
39% of the total cost of credit, and
10% of the amount borrowed
Both conditions need to be met.
Of course, most people taking out PCP finance wouldn't have known how much commission their dealership was receiving behind the scenes.
That information is likely to sit with the lender and broker, which means just digging out your original PCP paperwork may not tell you whether the commission met these thresholds.
What is a contractual tie?
A contractual tie is where the dealer or broker was restricted to one lender, or that lender had the right of first refusal on your finance.
For example, you might have assumed the dealership was looking at several lenders before offering you a finance deal when, in reality, it had an arrangement with one particular finance company.
If that relationship was not properly explained to you, your agreement may potentially fall within the FCA’s scheme.
What about fixed or flat-rate commission?
A fixed or flat-rate commission does not automatically mean your agreement qualifies for compensation, but the fact that there was no DCA does not necessarily settle the question either.
Not every dealership was paid using a discretionary commission model. Some lenders paid dealers a fixed amount or percentage for arranging finance.
What matters under the FCA’s current redress scheme is whether the commission arrangement meets one of the relevant tests.
For example, a non-DCA commission could still be relevant if it meets the FCA’s high commission criteria.
So, if your lender has just told you there was no DCA, it can be worth finding out whether another type of commission was paid and whether that arrangement was assessed under the wider scheme.
What should I look for in the lender's response?
You should check whether your lender has ruled out only a DCA or whether it has assessed your agreement against all of the FCA’s relevant criteria.
There is a big difference between your lender saying: “Your agreement did not include a discretionary commission arrangement.” and: “We have assessed your agreement under the FCA redress scheme and found that none of the relevant unfair features apply.”
The first only answers the DCA question.
The second suggests the lender has looked at the wider eligibility criteria.
If the response isn't clear, you can ask the lender what type of commission was paid and whether your agreement was also checked for high commission and contractual ties.
Can I ask my lender to review its decision?
Yes, if you think your lender has missed something or has only looked for a DCA, you can ask them to review the decision.
It helps to be specific about what you want them to check.
For example, you could ask whether:
Any other type of commission was paid
The commission met the FCA’s high commission thresholds
There was a contractual tie between the dealer and lender
The commission arrangement was properly disclosed to you
This gives you a clearer idea of what the lender has actually investigated rather than relying on a simple “no DCA” response.
If you're unsure where to make your complaint or who you need to contact, our guide on where to make a complaint about PCP car finance explains the process.
Can I take the complaint to the Financial Ombudsman?
Yes, you may be able to take your complaint to the Financial Ombudsman Service if you disagree with your lender’s final decision.
The Financial Ombudsman is a free service for consumers and can look at whether the lender has dealt with your complaint correctly.
If you receive a redress answer from your lender and believe the FCA’s rules have been applied incorrectly, you can challenge the outcome.
For example, you might believe the lender failed to consider a high commission arrangement or incorrectly decided that a contractual tie did not qualify.
Make sure you check the deadline given in your lender’s response, as you need to contact the Financial Ombudsman by the date stated in the letter.
Why might my lender not be able to give me a final answer yet?
Your lender may not be able to give you a final answer because parts of the FCA’s motor finance redress scheme are currently suspended while legal challenges are being heard.
Lenders are still able to carry out work behind the scenes, including looking into agreements and checking whether some customers are not eligible.
However, they do not currently need to calculate or pay compensation while the legal process is ongoing.
That means you may receive information about whether your agreement had a DCA without receiving a final decision on compensation.
If you've been waiting for an answer for some time, our guide on why PCP claims are taking so long explains the reasons behind the delays.
You can also read our guide on the FCA motor finance scheme being partially suspended for more information on what has changed.
What should I do if I'm told there was no DCA?
If you're told there was no DCA, check whether your lender has also considered high commission and contractual ties before assuming your claim is finished.
If you receive a final decision that you believe is wrong, you can ask your lender to review it and may be able to refer your complaint to the Financial Ombudsman Service.
You can complain directly to your lender and use the Financial Ombudsman for free.
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