DCA redress: Key steps for motor finance firms post-landmark ruling

With the FCA’s ongoing investigation into Discretionary Commission Arrangements (DCAs) and pivotal updates expected in May 2025, a recent Court of Appeal ruling has further shifted the balance in favour of consumers.

On 25th October, the court declared the use of 'undisclosed commission' in motor finance contracts unlawful. This landmark ruling will inevitably influence the regulator's decision on DCAs, potentially setting the stage for a large-scale redress.

In this article, we’ll cover the essential steps motor finance firms can take to brace for these potential regulatory changes.

Urgent steps motor finance firms should take following the DCA ruling

Here’s how you can prepare:

Complaints surge handling

With a second surge in complaints expected, the immediate challenge is for firms to ensure they have scalable processes in place. Effective complaints handling, including managing Data Subject Access Requests (DSARs), will require robust categorisation, workload management, and high standards of customer communication throughout each resolution.

Firms with more sophisticated tools and technology can enter the complaints onto their systems and confirm eligibility by merging to historic customer databases, employing matching algorithms where required. The less technologically advanced may have to establish more manual labour-intensive processes.

Impact assessment

Conducting a comprehensive review of your motor finance portfolio will help identify eligible customers and assess the financial impact of potential redress actions. This is not a process to be underestimated, it will be onerous and complex. There may also be a requirement in the interim, depending on internal governance requirements, to calculate an initial estimate of potential financial outcomes. Any assessment will need to be demonstrably robust and validated to satisfy regulatory and any internal requirements.

Data investigation

Assessing data quality is essential for calculating redress accurately. Given the likely eligibility period dating back to 2007, many lenders will face challenges due to system migrations and data fragmentation. While key details, like agreed interest rates, are usually available, determining what the rate should have been without the DCA may require conservative assumptions in favour of the customer. 

In our experience, where there is uncertainty around the data, the redress calculation must resort to conservative assumptions that benefit the affected customer. Further data challenges such as dealing with changes in customer addresses, deceased customers and debt sales cause additional complexity.

Remediation planning

Preparing for a redress programme typically requires specialist expertise and additional head count within operations, legal, finance, risk, IT, all supported by effective programme management and appropriate overarching governance protocols. Early planning for a remediation programme will enable your firm to quantify resource requirements and then arrange and assign roles and responsibilities across your internal teams with external parties engaged early to secure any supplementary resources.

DCA redress: Preparing for what’s next

As the potential for redress looms, motor finance firms should be using the time between now and then to understand their own position and be prepared for a possible directive to follow from the FCA.

Establishing robust, efficient processes early can help control remediation costs. For those looking to act swiftly, collaborating with specialists in data management, regulatory compliance, credit risk analytics, and legal support—particularly those experienced in similar remediation efforts—may prove invaluable.

Partnering with experts can provide the comprehensive insights and resources needed to manage the complexities of the redress process, ensuring firms stay compliant, protect consumer interests, and uphold high ethical standards.