The Financial Conduct Authority (FCA) has annnounced it will extend its probe into the motor finance market today amid ongoing tensions between thousands of consumers and providers over commission arrangements.
The FCA said it intended to set out next steps in its review into the past use of so-called DCAs in May 2025, as opposed to an initial deadline of September 2024. It added it would lengthen the current eight week deadline firms have to respond to complaints.
“Firms involved in our review have engaged with us constructively, but many have struggled to supply the data we need within the requested time,” the UK finance watchdog said in a statement. Difficulties include firms not keeping older data, and data being stored on multiple systems or being spread between lenders and brokers.
Barclays Partner Finance has also started a judicial review a into the Financial Ombudsman Services’s decision to uphold a complaint relating to its use of DCA, which will consider legal issues “highly relevant” to the FCA’s a review. A decision is expected in autumn, while relevant other judgements are also expected in cases heard by the Court of Appeal.
“We are therefore proposing to extend the current pause to the 8-week deadline for firms to respond to motor finance complaints involving a DCA. Under our proposals, firms will not have to issue a final response to DCA complaints until after 4 December 2025 at the earliest.”
The FCA in January announced it would review historical motor finance commission arrangements, between 2007 and 2021, to ensure consumers were receiving appropriate settlements should there be misconduct. Following the announcement, billions was wiped from the value of some banks amid investor concern over the size of any potential compensation bill.
A DCA was an agreement between a lender and car dealers or brokers, which enabled the latter to determine interest rates on car repayment plans within a range decided by the lender. They were banned by the regulator in January 2021 after it found they had cost customers £300m more per year than the flat-fee model used today.
It is still too early to say whether the FCA will intervene by introducing an alternative way of dealing with DCA complaints but it is understood to be more likely than when its began the review. Interventions proposed include a consumer redress scheme.
According to its statement, the FCA is also proposing giving consumers until after 29 July 2026, or 15 months from the date of their final response letter from the firm to refer a complaint to the Financial Ombudsman, instead of the usual six months.