If you had a car finance agreement in the UK before January 28, 2021, it might have included a Discretionary Commission Arrangement (DCA). These arrangements are now a key focus of the Financial Conduct Authority (FCA) and could mean you are owed compensation. Allegiant Finance Services is here to explain what DCA claims are and how we can help you if you believe you were affected by a car finance DCA claim.
What is a Discretionary Commission Arrangement (DCA)?
A Discretionary Commission Arrangement (DCA) was a type of commission model where the car dealer or finance broker had the power to decide or adjust the interest rate you, the customer, would pay on your car finance agreement. Crucially, the higher the interest rate they set (within a certain range allowed by the lender), the more commission they would earn from the finance company. This created a clear conflict of interest, as it incentivised the dealer or broker to charge you a higher interest rate than you might otherwise have qualified for, simply to increase their own earnings.
The FCA banned DCAs in the motor finance market from January 28, 2021, stating that these arrangements led to higher finance costs for consumers. The regulator is now conducting a review into historical DCA practices to understand the extent of consumer harm and to determine if a widespread redress scheme is necessary. This FCA DCA review is a significant development for anyone who had car finance before this date.
Why Are DCA Claims Being Made?
The primary reason for DCA claims is the inherent unfairness of the commission model. If a dealer or broker could inflate your interest rate to earn more commission, without you being fully aware of this arrangement, then your finance agreement may not have been in your best interests. You may have paid significantly more for your car finance than you needed to.
Key issues with DCAs include:
- Lack of Transparency: Customers were often not told that the interest rate could be adjusted by the dealer, nor were they informed about the commission structure that incentivised higher rates.
- Conflict of Interest: The dealer or broker was incentivised to act in their own financial interest, rather than securing the best possible finance deal for the customer.
- Potential Overcharging: As a result, many consumers may have been charged higher interest rates and, consequently, paid more over the life of their finance agreement than they should have.
If you are wondering, “What is a car finance DCA?” and suspect your agreement included one, you could be eligible for compensation for DCA car finance.
How Do I Know If I Had a DCA in My Car Finance Agreement?
It can be difficult to know for certain if your car finance agreement included a DCA without investigation. These arrangements were common before January 2021. If you took out car finance (like PCP or HP) for a new or used car before this date, a DCA might have been in place.
Allegiant Finance Services can help you investigate whether your agreement involved a DCA. We can review your finance documents and liaise with your lender to determine the nature of the commission arrangement.
Making a Claim for DCA Car Finance
If it is found that your car finance agreement included a DCA and you were not made aware of it, or if the arrangement led to you being charged an unfair interest rate, you may be able to make a claim for DCA car finance. The aim of such a claim is to recover the additional costs you incurred due to the discretionary commission.
The FCA has put temporary rules in place regarding complaints about DCAs. Financial firms have an extended period to respond to these complaints, and consumers have a longer timeframe to take their complaint to the Financial Ombudsman Service (FOS) if they are not satisfied with the outcome. This is to allow the FCA to complete its review and decide on the best way forward for consumers.
How Allegiant Can Assist with Your DCA Claim
Navigating the process of a DCA claim can be complex, especially with the ongoing FCA review. Allegiant Finance Services is an FCA-regulated claims management company with the expertise to guide you through every step:
- Investigation: We will help determine if a DCA was part of your car finance agreement.
- Evidence Gathering: We will assist in collecting all necessary documentation.
- Claim Submission: We will formally submit your DCA claim to the relevant lender or broker.
- Negotiation and Escalation: We will manage communications and negotiations, and if necessary, help you escalate your complaint to the Financial Ombudsman Service.
We aim to make the process as straightforward as possible for you. It is important to remember that you can also make a complaint directly to your lender or broker yourself, and if you are unhappy with their response, you can take your case to the Financial Ombudsman Service for free. If you choose to use our services, we typically operate on a no-win, no-fee basis (terms and conditions apply and will be clearly explained).
Start Your DCA Claim Investigation Today
If you had car finance before January 28, 2021, and are concerned you might have been affected by a Discretionary Commission Arrangement, don”t wait. The FCA DCA review is ongoing, and understanding your position now is crucial.
Disclaimer: This page provides general information about Discretionary Commission Arrangement (DCA) claims. It does not constitute financial or legal advice. The outcome of any claim is subject to the specific circumstances of your case and the decisions of lenders, the Financial Ombudsman Service, or the courts. Allegiant Finance Services Limited is authorised and regulated by the Financial Conduct Authority.
