Discretionary Commission Arrangements - Compaints and refunds
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Discretionary Commission Arrangements (DCAs) were a common practice in the UK motor finance industry, but they have come under intense scrutiny and were ultimately banned by the Financial Conduct Authority (FCA) in January 2021. Here's a breakdown of what they are and why they are a concern:
What are Discretionary Commission Arrangements?
In a DCA, car dealerships or brokers had the flexibility to set the interest rate on a car finance agreement. The higher the interest rate they offered to the customer, the higher the commission they received from the lender.This created a potential conflict of interest.
Why are DCAs a concern?
The FCA's Intervention:
The FCA banned DCAs in 2021 to address these concerns and protect consumers. This ban aimed to:
Ongoing Impact:
Despite the ban, the legacy of DCAs continues to impact the motor finance industry. The FCA is currently conducting a review into the historical use of DCAs and their impact on consumers. This could lead to further regulatory action and potential redress for customers who were overcharged.
In essence, Discretionary Commission Arrangements were a controversial practice that allowed car dealerships to prioritize their own financial gain over the best interests of their customers. The FCA's ban aims to create a fairer and more transparent motor finance market.
Click the logo below to go to our dedicated Discretionary Commission Arrangement site:
The figures quoted are only calculated on actual money sent to you. If you get a balance reduction, we do not charge any fees on the balance reduction element, just on money sent to you by the lender.
Band |
Redress awarded for a claim (£) |
The maximum percentage rate of charge |
The maximum total charge (£) |
1 |
£1-£1,499 |
30% plus vat |
£420 |
2 |
£1,500 - £9,999 |
28% plus vat |
£2,500 |
3 |
£10,000-£24,999 |
25% plus vat |
£5,000 |
4 |
25,000-£49,999 |
20% plus vat |
£7,500 |
5 |
£50,000 or above |
15% plus vat |
£10,000 |
These are some examples:
Band 1
Compensation amount £1,000. Our Fee £300 + VAT (£360 inc VAT). You get £640
Compensation amount £1,499. Our Fee £350 + VAT (£420 inc VAT). You get £1,079
Band 2
Compensation amount £5,000. Our Fee £1,400 + VAT (£1,680 inc VAT). You get £3,320
Compensation amount £9,999. Our Fee £2,083.33 + VAT (£2,500 inc VAT). You get £7,499
Band 3
Compensation amount £15,000. Our Fee £3,750 + VAT (£4,500 inc VAT). You get £10,500
Compensation amount £24,999. Our Fee £4,166.67 + VAT (£5,000 inc VAT). You get £19,999
Band 4
Compensation amount £30,000. Our Fee £6,000 + VAT (£7,200 inc VAT). You get £22,800
Compensation amount £49,999. Our Fee £6,250 + VAT (£7,500 inc VAT). You get £42,499
Band 5
Compensation amount £50,000. Our Fee £7,500 + VAT (£9,000 inc VAT). You get £41,000
Our average refund from 118 118 Money is £2,871.
118 118 Money offers loans of between £1,000 and £3,000 at an interest rate of 49.9% Representative. They also now offer credit cards to the same sub prime group at an interest rate of 34.0% pa. 118 118 Money upheld 43.46% of complaints made between July and December 2020.
Making UK Credit Refund Complaints is no different to most other lenders. The challenge with UK Credit is that they like sending information in the post which can become frustrating. When they do send information by email, they encrypt the data (which is good), but they like to embed files in Excel which can be difficult to open.
UK Credit Refunds are very similar to other Guarantor lenders, such as Amigo Loans. They seem to offer almost exactly the same amounts of money and they charge the same high interest rate. Our average refund for UK Credit claims is £4,177.15
Moneybarn is a well established car, van and motorcycle finance company. In 2014 it was purchased by Provident Financial PLC. They have not always treated customers well or fairly having been fined almost £3m by the FCA. Read about it here.
Lending Stream refund complaints tends to get fair payouts for the customer with our average refund for them being £1,524 since our first complaint back in 2017.
Loans2Go (trading name of Loans2Go limited) is a loans provider offering unsecured loans of £250 to £3,000, from 18 months to 24 months.
Loans2Go provide their service of super-fast, easily approved loans at a representative APR of 770%, up to 937.8%. This means if you borrow £550 over 18 months at a flat rate of 180% per annum (fixed) you will be repaying £2,035.08 in total.
Mobile Money have been in business for many years and focus on sub prime lending. The interest rates charged by Mobile Money are very high (in our opinion) and appear to vary between 49.9% to 499.9%. Considering they have your car to act as a guarantor of the loan, that seems a lot of interest to charge.
We are starting to get good results with this car finance lender. The average offer is £3,979.35.
Our average refund from Avant Credit is £4,924.
Avant Credit have lent to more than 80,000 people and have lent a total of £250 million. That tells us that the average loan size is £3,125. They charge 42.5% interest representative, which does make them cheaper than some of their competitors, but still in the mid price range.
Avant Credit is not accepting any new loans. Avant Credit complaints had 1,545 complaints in 2020 and upheld 32.7% of those complaints.
Guarantor My Loan are another guarantor lender, this time charging 48.9% APR. This makes them slightly better value than Amigo Loans, but still very expensive. With Guarantor My Loan you can borrow between £1,000 and £10,000 over 12 to 60 months.
When we make a Guarantor My Loan refund claim we have to be very careful as they will sometimes make a small offer to the customer and try and get the customer to accept without us knowing. The offer is always a lot less than we would hope to be able to get either as a result of the Guarantor My Loan Refund Complaint or when we take the case to the FOS.
The UK's payday lending market has undergone a dramatic transformation in recent years. Once dominated by companies offering high-cost, short-term loans, the industry has seen a wave of closures and consolidations due to increased regulation, changing consumer behaviour, and increased competition.
Here's a look at some of the prominent payday lenders and short-term loan companies that have ceased trading:
Big Names That Disappeared:
Other Companies That Closed Down:
Factors Contributing to the Decline:
The Future of Short-Term Lending:
While the payday lending landscape has changed dramatically, the demand for short-term credit remains. New players are emerging, offering more flexible and affordable alternatives, with a focus on responsible lending and customer well-being. The FCA continues to monitor the market to ensure consumers are protected and treated fairly.
If you're considering a short-term loan, it's crucial to:
This article provides a comprehensive overview of the changing landscape of the payday lending market in the UK. It highlights the companies that have ceased trading and the factors that contributed to their decline. It also emphasizes the importance of responsible borrowing and encourages consumers to explore alternative options before taking on high-cost credit.
More information can be found by following this link: https://www.amigoscheme.co.uk