Ask a dealer principal what a discretionary commission arrangement is and most can quote the headline numbers: £7.5 billion, 12.1 million agreements, the redress scheme every trade publication has covered since PS26/3 landed. Ask what the arrangement itself actually was, and the answer usually gets vague.
A discretionary commission arrangement, DCA, was a commission structure where your dealership set the interest rate a customer paid, and your commission rose the higher you set it. The dealer decided the rate. The dealer's own pay depended on that decision. The FCA banned the model outright in 2021.
How a DCA actually worked
Under a discretionary model, the lender gave the dealer or broker a range, a base rate and a ceiling, and left the final customer rate to the dealer's discretion. Commission was then calculated as a share of the difference between the base rate and whatever rate the dealer actually charged. Set the rate at the bottom of the range and commission was low. Push it toward the top and commission climbed with it.
Nothing about that structure required a dealer to act against a customer's interest on any single deal. It simply made it more profitable to do so, on every deal, for as long as the model existed. The customer sitting across the desk had no way of knowing the number they were being quoted was partly a function of what paid the salesperson best that afternoon.
Why the FCA banned it
The FCA studied this model for years before acting. Its own impact assessment estimated that banning discretionary commission arrangements would save consumers around £165 million a year in interest costs they would otherwise have paid, without any equivalent visibility into why their rate was higher than the person's next to them. That analysis sits behind PS20/8, published in July 2020.
PS20/8 introduced two changes to the CONC 4.5 commission rules, both effective 28 January 2021. CONC 4.5.6R prohibits a lender or credit broker from entering into or relying on any discretionary commission arrangement at all. Not capped, not disclosed, banned. Alongside it, CONC 4.5.3R was tightened to require prominent disclosure of the existence and nature of any remaining commission arrangement, wherever it could affect the broker's impartiality or the customer's decision.
Since 28 January 2021, if your dealership arranges motor finance, the commission you earn cannot legally move with the rate you set. That part is settled and has been for over five years. What is not settled is what happened before that date.
What this has to do with your dealership now
PS26/3 is the FCA's answer to that question, and we have covered the scheme mechanics and dealer liability position separately in detail. The short version: lenders fund and administer the redress, not dealers directly, but the conduct being compensated is conduct that happened at your dealership, on your sales floor, on agreements your team wrote.
The scheme covers agreements entered between April 2007 and November 2024, an estimated 12.1 million of them, with total redress running to roughly £7.5 billion. A large proportion of those agreements were written under a discretionary commission model, because that model was standard market practice across the sector for most of that window, not a fringe arrangement used by a handful of dealers. What that means for any single dealership's own historic book depends on which lenders it used and how those lenders structured commission at the time, detail that is easy to lose once the staff who set up those agreements have moved on.
That is the part worth sitting with. The DCA itself is not the live compliance risk. It has been illegal for five years. The risk is a lender coming back to you for records on agreements written under a model your dealership has not thought about since before most current staff started.
DCA era vs today
| Element | DCA era (before 28 Jan 2021) | Since 28 Jan 2021 |
|---|---|---|
| Who set the rate | Dealer, within a lender-set range | Set by the lender's pricing, not the dealer |
| How commission was calculated | Rose with the rate the dealer chose | Fixed or flat, cannot vary with the rate |
| Disclosure required | Weakly enforced, often absent | Existence and nature must be disclosed prominently (CONC 4.5.3R) |
| Legal status | Permitted at the time | Banned outright (CONC 4.5.6R) |
| Current exposure | Subject to PS26/3 reassessment if unfair | No DCA exposure, but disclosure obligations still active |
What to check in your own history
Take Sarah, a compliance lead at a three-site group who joined in 2022. Nobody on her current team was there when the finance agreements from 2015 to 2020 were written, and the lender panel her dealership used back then has since changed twice. When a request lands from a lender asking for records on agreements from that period, she is starting from nothing, not because anyone did anything wrong, but because nobody thought historic finance records were worth keeping organised once the deals had settled.
That is the practical failure point. Not the DCA itself, the retrieval of what your dealership can prove happened five or ten years ago. A few questions worth answering before a lender asks them for you:
- Do you know which lenders you held finance introducer agreements with before January 2021?
- Can you locate deal-level records from that period by customer or agreement reference, not just by rough date range?
- Has any lender already contacted you for records relating to specific historic agreements?
- Does anyone currently at your dealership actually know how commission was calculated under your old agreements, or has that knowledge left with the staff who set it up?
None of this changes your legal position. Dealers are not directly liable under PS26/3. But a lender working through a redress assessment will ask you for whatever evidence exists, and a dealership that can answer quickly looks very different to one that cannot answer at all. Being able to produce that evidence on demand is exactly what FCA compliance monitoring for dealerships is meant to solve, historic requests included.
What dealer principals should do this week
- List every lender your dealership held a finance introducer agreement with before January 2021, even ones you no longer work with.
- Ask your current lender panel whether they have already contacted you, or expect to, about historic agreements under the redress scheme.
- Locate where your pre-2021 finance paperwork actually sits. A physical archive, a decommissioned system, a previous owner's records. Know the answer before you need it urgently.
- CONC 4.5.6R requires that commission cannot vary with the interest rate or other credit terms a customer is given, with no exceptions for legacy arrangements. Firms are expected to be able to show that their current commission structure has actually been reviewed against that rule, not simply assumed compliant because nobody has raised it.
- Check that commission disclosure under CONC 4.5.3R is actually happening on today's calls, not just written into your finance paperwork. That obligation did not end when the DCA ban started; it runs on every deal you write now.
axleo checks commission disclosure on every recorded call against CONC 4.5.3R, so you have an answer for today's deals even if your historic paperwork takes longer to dig out. See how axleo automates compliance monitoring across your dealership. Whether you use software or manual review, the obligation to evidence what happened on a call, historic or current, sits with you.