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Most people have heard about Discretionary Commission Arrangements — the practice where car dealers secretly set your interest rate to earn a higher fee. But the FCA's final motor finance redress scheme, published in March 2026, covers not one but three distinct types of undisclosed commission. Each triggers different eligibility criteria and different levels of compensation.
This post breaks down all three types in plain English, explains which is most likely to have been in your agreement, and shows you what each means for the amount you could be owed. For the broader context of mis-sold car finance claims in 2026, or a deeper look at our full guide to Discretionary Commission Arrangements, follow those links first.
Why There Are Now Three Commission Types — Not Just DCAs
When the FCA banned DCAs in January 2021, it was responding to the most visible form of consumer harm: dealers inflating interest rates to earn bigger commissions. But as the FCA's motor finance investigation deepened through 2024 and 2025, and as the courts confirmed the unlawfulness of undisclosed commission arrangements more broadly, it became clear that DCAs were not the only problem.
Policy Statement PS26/3 (March 2026) codifies three categories of commission arrangement where non-disclosure resulted in consumer harm. Existing coverage of hidden commission explained in our earlier article focused on DCAs — this post covers all three types as defined by the final scheme rules.
Type 1: Discretionary Commission Arrangements (DCAs)
DCAs are the most widespread form. Under a DCA, the lender gave the car dealer the power to set the interest rate on your finance agreement within a permitted range — and the higher the rate the dealer set, the more commission they received.
In practice, this meant dealers had a direct financial incentive to charge you as much as possible, with no obligation to disclose this to you. The FCA found that on a typical £10,000 agreement, DCA practices cost consumers approximately £1,100 more than a flat-commission alternative over four years.
DCAs were prevalent from at least 2007 until the FCA's ban took effect on 28 January 2021. Agreements that include a DCA — and where the commission was not clearly disclosed — are covered by the scheme regardless of whether the commission exceeded the minimum threshold (£120 pre-2014; £150 post-2014).
For the most serious DCA cases — where the commission was at least 50% of the total cost of credit and at least 22.5% of the loan — consumers receive the full commission repaid, plus interest. For all other DCA cases, the hybrid remedy applies.
Type 2: High Commission Arrangements
This type covers agreements where the interest rate was not set discretionarily by the dealer, but the commission paid was simply very large — specifically, at least 39% of the total cost of credit and at least 10% of the loan amount.
The rationale is straightforward: even if the dealer could not move your rate, a commission of 39% or more of the total cost of credit represents a significant financial incentive that could have influenced the advice and options presented to you. Consumers were entitled to know this. In almost all cases, they were not told.
High commission arrangements were particularly common among lenders whose commission structures were not DCA-based but where the commission paid to dealers was nonetheless disproportionate. Lenders including Barclays and Close Brothers are among those subject to claims under this category. For a full list, see lenders we claim against.
Type 3: Contractual Ties
The least well-known category, contractual ties covers arrangements where a lender paid a dealer for giving them exclusivity or a right of first refusal on finance business.
In practical terms, this means a lender paid a dealer to ensure their finance products were presented to consumers first — or even exclusively. Consumers were never told that the finance options they were being shown had been pre-selected by a commercial arrangement. This is a clear conflict of interest that the FCA has confirmed should have been disclosed.
There is one key exclusion for this category: if the lender can demonstrate that the commercial relationship between the manufacturer and dealer was prominently signalled — for example, through brand co-location and trading names that made the relationship obvious — the tie may not be covered. But this exception is narrow, and the burden of proof lies with the lender.
Which Commission Type Was Most Likely in Your Agreement?
The honest answer is that you almost certainly cannot tell from the agreement documents you were given — because the commission arrangement was not disclosed. PCP Missold's process involves reviewing lender records and commission data to identify which type of arrangement was in place.
As a general guide:
- If your agreement was taken out before January 2021: DCAs are extremely likely to have been in place
- If your agreement was taken out with a dealership linked to a manufacturer finance arm: a contractual tie may have existed alongside or instead of a DCA
- If your agreement was post-2021 and the interest rate was fixed from the start: a high commission arrangement or contractual tie is more likely than a DCA
How Each Commission Type Affects Your Compensation
The FCA's PS26/3 — the final rules sets out a compensation methodology linked to commission type. Our compensation calculator guide walks through the numbers in detail. In summary:
DCA — commission below 50%/22.5% threshold
Hybrid remedy: average of estimated loss and commission paid, plus interest (3% floor)
DCA — commission at or above 50%/22.5%
Commission repayment: full commission paid back, plus interest (3% floor) — highest payout tier
High commission arrangement
Hybrid remedy: same formula as above
Contractual tie
Hybrid remedy applies unless commission also meets the 50%/22.5% threshold
What to Do Next
Whether your agreement involved a DCA, a high commission arrangement, or a contractual tie, your right to compensation under PS26/3 is the same: the lender failed to disclose a material conflict of interest, and you are owed redress. Use our PCP eligibility checker to confirm you qualify, then see how it works for a full walkthrough of the claims process.
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