The Financial Conduct Authority (FCA) is weighing up whether to extend the time that companies have to respond to motor finance complaints following a landmark high court ruling.
In an announcement today, the watchdog said it is launching a consultation on whether to give firms more time to respond to customers’ concerns over the use of now-banned non-discretionary commission arrangements.
In January, the FCA launched a review of historical motor finance DCAs and whether there was “widespread misconduct” before they were banned in 2021.
DCAs allowed brokers to adjust the interest rates on motor finance, while non-DCAs do not.
However, the landmark court ruling last month ruled that a broker could not lawfully receive a commission from the lender without obtaining the customer’s fully informed consent to the payment, whether discretionary or not.
This has left the FCA considering whether to expand its investigation to also encompass non-DCA agreements, leaving motor finance companies scrambling as the potential for liabilities skyrocket.
“The Court of Appeal’s ruling means many customers who bought a car using finance through a dealer could be owed compensation,”said FCA chief Nikhil Rathi.
“We want to make sure that consumers who are owed money get it in an orderly way, and that the motor finance market continues to provide competitive deals for the millions of people that rely on it.”
Two options to extend the deadline are currently being considered by the regulator: extending the deadline to May 2025, or December 2025.
This way, the deadline will definitely allow time for the lenders involved in the ongoing court case over the legality of the agreements to appeal to the Supreme Court, the FCA said.
“Motor finance firms will need to use the time provided to ensure they have the resources to issue final responses to complaints at the end of a proposed extension,” it added.
“Motor finance firms are also likely to need to consider whether they should make any financial provisions as complaints need to be handled in line with the law.”
The FCA is also consulting on giving consumers more time to refer motor finance commission complaints not involving a DCA to the Financial Ombudsman Service.