AUS
NZ
UK
CA
USA
IND
Highlights
- Time Extension Proposal: The FCA seeks feedback on extending complaint response timelines for non-discretionary commission motor finance cases.
- Court Ruling Impact: Recent judgments mandate transparency on commissions, affecting consumer complaints and firm obligations.
- Consumer Protections: FCA aims to ensure orderly and consistent complaint resolutions while aligning with potential Supreme Court decisions.
The Financial Conduct Authority (FCA) is consulting on proposals to extend the time available for motor finance firms to respond to complaints involving non-discretionary commission arrangements. This follows the Court of Appeal’s October 25 ruling, which found it unlawful for car dealers to receive commissions from lenders without full disclosure and informed customer consent.
Court of Appeal Judgment Sparks Consumer Concerns
The recent cases—Hopcraft v Close Brothers Ltd, Johnson v FirstRand Bank Ltd, and Wrench v FirstRand Bank Ltd—established that informed consent requires borrowers to be made aware of all material facts, including the commission amount and calculation method. The ruling applies to both discretionary and fixed commission agreements, with discretionary commission arrangements (DCAs) already banned by the FCA in 2021.
As a result of the judgment, motor finance providers are likely to face an influx of complaints. To address this, the FCA has proposed two potential timelines for extending firms’ response deadlines:
- May 31, 2025: To align with a possible Supreme Court decision on granting appeal permissions.
- December 4, 2025: To match the existing complaint handling rules for discretionary commission cases.
Consumer Guidance and Industry Responsibilities
The FCA advises consumers dissatisfied with their motor finance agreements to lodge complaints, even if previously informed that a DCA was not involved. Firms must use the proposed additional time to allocate resources for complaint investigations, issue final responses, and consider financial provisions for potential liabilities.
Additionally, the FCA is consulting on extending the timeline for consumers to escalate non-DCA complaints to the Financial Ombudsman Service.
Historical DCA Review Progress
The FCA’s ongoing review of historical DCAs, launched in January 2024, aims to determine if misconduct occurred before the 2021 ban and whether compensation is warranted. However, the review has faced delays due to the complexities of gathering data and aligning with ongoing legal judgments.
In September, the FCA extended the complaint handling deadline for DCA-related cases to December 4, 2025. This decision accounts for recent court rulings, including the Court of Appeal’s decision and a judicial review by Barclays Partner Finance.
Awaiting Supreme Court Clarity
The FCA has urged the Supreme Court to expedite its decision on whether it will hear an appeal related to the recent ruling. If permission is granted, the FCA intends to provide expert input to assist the Court.
Ensuring Fair Outcomes for Consumers and Firms
By proposing these extensions and actively engaging with the legal process, the FCA aims to prevent inconsistent or disorderly outcomes for both consumers and motor finance firms. The regulator’s actions underscore its commitment to balancing consumer protection with market stability during a period of significant legal and regulatory scrutiny.
