FCA pauses motor finance complaints amid legal dispute
LONDON: The Financial Conduct Authority (FCA) has announced a temporary pause on the deadline for motor finance firms to respond to customer complaints about commission arrangements. The pause will last for 37 weeks, or about nine months, starting from today.
The FCA said the move was necessary to avoid “disorderly, inconsistent and inefficient outcomes” for consumers and firms, while it reviews historical motor finance commission arrangements and sales across several firms.
The FCA banned discretionary commission arrangements in 2021, which allowed brokers to increase the interest rate that customers paid for their motor finance. The FCA asked firms to review their practices and address any harm that was identified.
However, since then, there have been a high number of complaints from customers claiming compensation for commission arrangements prior to the ban. Most of these complaints have been rejected by firms, who argue that they have not acted unfairly or caused any loss to their customers.
The Financial Ombudsman Service, which handles unresolved complaints, has found in favour of some complainants in two recent decisions. This is likely to prompt more complaints from consumers to firms and the ombudsman.
Claims have also been brought in the County Courts, some of which have been upheld. This means that there is a significant dispute between some firms and consumers on whether firms have breached legal and regulatory requirements.
The FCA said that if it finds that there has been widespread misconduct and that consumers have lost out, it will identify how to ensure that people who are owed compensation receive an appropriate settlement in an orderly, consistent and efficient way. It may also resolve any contested legal issues of general importance.
The FCA said that it will be guided by its statutory objectives to protect consumers, ensure market integrity and promote competition in the interests of consumers. It also said that it is important to manage these risks because motor finance is not protected by the Financial Services Compensation Scheme, unlike most types of consumer credit.
The pause will apply to complaints received by firms on or after 17 November 2023 and on or before 25 September 2024. Consumers will also have up to 15 months to refer their complaint to the ombudsman, rather than the usual six months. The FCA may extend the pause if more time is needed to analyse the issues and decide on the best course of action.
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