Discretionary Commission Arrangements - Complaints and Refunds

You do not need to use a Claims Management Company. You can make the claim directly to the lender and if they reject your complaint you can take it to the Financial Ombudsman Service free of charge, but you must do this within 6 months of the lenders Final Decision Letter.

Ford Car Finance and the Discretionary Commission Arrangement Issue

Ford, like many automotive manufacturers, offers financing options for customers looking to purchase their vehicles. The convenience of dealership financing can be attractive for buyers, enabling them to secure a new car and finance package in one place. However, the structure of these financial arrangements, particularly the discretionary commission model used by Ford and other dealers, has come under scrutiny by regulatory bodies such as the Financial Conduct Authority (FCA) and has been a subject of concern for the Financial Ombudsman Service (FOS).

Understanding Discretionary Commission Arrangements

Discretionary commission arrangements in car finance refer to the practice where the interest rate offered to the customer can be adjusted by the dealer or broker, with the commission they receive from the finance company being linked to the interest rate applied to the loan. Essentially, the higher the interest rate the dealer sets, the higher the commission they earn. This model can create a conflict of interest, as it incentivizes dealers to secure finance agreements at higher interest rates, potentially leading to customers paying more than they need to.

The FCA's Stance

The Financial Conduct Authority (FCA), which regulates financial services firms and markets in the UK, has expressed concerns about discretionary commission models. The FCA's investigations and findings have highlighted that such models can lead to poor outcomes for consumers, with many paying over the odds for their car finance. In particular, the FCA has been worried that the lack of transparency and potential for conflict of interest does not align with the fair treatment of customers.

In response, the FCA has taken steps to address these issues. After a period of consultation and review, the FCA announced rules banning discretionary commission models. The aim is to eliminate the financial incentive for brokers and dealers to increase interest rates and to ensure that customers are offered finance based on their creditworthiness and the appropriateness of the financial product for their needs, rather than on the basis of what generates the highest commission for the seller.

The Financial Ombudsman Service (FOS) and Discretionary Commissions

The Financial Ombudsman Service (FOS) plays a crucial role in resolving disputes between consumers and financial businesses. It has dealt with complaints related to car finance arrangements, including issues arising from the use of discretionary commission models. The FOS considers complaints on a case-by-case basis, taking into account the fairness and transparency of the finance agreement, as well as whether the customer was treated fairly and informed adequately about the nature of the commission arrangement and how it might affect the interest rate they pay.

Complaints reviewed by the FOS have sometimes resulted in decisions that require finance companies to compensate customers where it's found that the interest rates were unfairly inflated due to discretionary commissions. These decisions further highlight the issues surrounding such commission models and the impact they can have on consumers.


The use of discretionary commission arrangements in car finance has been a contentious issue, prompting regulatory intervention by the FCA to protect consumers and ensure fair treatment. Ford, along with other car manufacturers and dealers, has had to adapt to these regulatory changes, which aim to promote transparency and fairness in car finance. The FCA's ban on discretionary commissions marks a significant step towards ensuring that customers are offered finance deals that are in their best interests, not structured primarily to maximize dealer commissions.

For consumers, understanding the dynamics of car finance, including how commissions can influence the interest rates offered, is crucial. The regulatory actions by the FCA, supported by the oversight and dispute resolution provided by the FOS, are essential measures in safeguarding consumer interests and promoting trust in the car finance market.