What is a Discretionary Commission Model (DCM)?

A Discretionary Commission Model allows a car dealer to adjust the interest rate offered to a customer within a permitted range. The dealer’s commission can increase when the interest rate increases.

Why were Discretionary Commission Models banned?

The FCA banned DCMs because they created a conflict of interest. Dealers could earn more commission by charging customers higher interest rates, often without clear disclosure.

Are Discretionary Commission Models illegal?

DCMs themselves were not automatically illegal, but the FCA concluded they caused consumer harm. Their use raised serious concerns about fairness and transparency.

Do DCMs only affect PCP agreements?

No. While PCP agreements are commonly involved, Hire Purchase and other car finance products could also be affected if discretionary interest rates were used.

Can agreements made before the ban still be reviewed?

Yes. Agreements entered into before the 2021 ban may still be reviewed depending on circumstances, time limits, and how the agreement was sold.

Discretionary Commission Models (DCM) Explained

Discretionary Commission Models (DCMs) played a central role in many car finance mis-selling concerns in the UK. This page explains, in plain language, what DCMs are, how they worked, and why regulators intervened.

Part of the complete guide: Car finance mis-selling explained →

What is a Discretionary Commission Model?

A Discretionary Commission Model allows a car dealer to adjust the interest rate offered to a customer within limits set by the lender. The higher the interest rate, the more commission the dealer could earn.

From the customer’s perspective, the rate often appeared fixed or non-negotiable, even though discretion existed behind the scenes.

Why DCMs created a problem

DCMs created a conflict of interest. Dealers were financially rewarded for increasing interest rates, while customers were rarely told this was happening.

This undermined informed decision-making and transparency, which are core principles of UK consumer protection.

The FCA’s intervention and the 2021 ban

After investigating the car finance market, the FCA concluded that DCMs caused widespread consumer harm. As a result, Discretionary Commission Models were banned in January 2021.

The ban did not mean that all past agreements were automatically mis-sold, but it confirmed that the model itself posed serious fairness risks.

Which agreements may be affected

DCMs were most commonly used before 2021. Agreements taken out during that period may raise questions if:

The interest rate was higher than expected
No explanation was given about rate setting
Commission arrangements were not disclosed
Focus was placed on monthly payments only

DCMs and mis-selling complaints

The existence of a DCM does not automatically mean mis-selling occurred. Complaints usually focus on whether the customer was given clear, fair and transparent information at the point of sale.

Understanding how DCMs worked helps explain why some agreements are now being reviewed.

Next step: How to complain about car finance mis-selling →