FCA issues reminder to motor finance firms on financial resources amid review

LONDON: The Financial Conduct Authority (FCA) has issued a formal reminder to motor finance firms regarding the necessity of maintaining adequate financial resources consistently. This communication comes as the FCA conducts a review of the historical application of discretionary commission arrangements (DCA) within the motor finance sector.

The FCA’s scrutiny has revealed a variety of methods employed by firms to account for the potential repercussions of past DCA usage on their financial standing. The regulatory body expects that firms’ financial planning should include provisions for any additional operational costs arising from an uptick in complaints and, where relevant, the expenses associated with resolving these complaints.

As part of the ongoing review, the FCA has outlined several expectations for firms:

  • Continued Investigation: Firms are to persist in investigating complaints linked to DCA to ensure swift resolution if the current pause on complaint handling is lifted.
  • Data Subject Access Requests: In line with the Information Commissioner’s Office guidance, firms must confirm the involvement of a DCA in a consumer agreement upon request, irrespective of a formal data subject access request.
  • Litigation Notification: The FCA must be informed of any litigation concerning motor finance commissions that may escalate to the High Court or Court of Appeal.

Firms seeking further guidance can refer to the FCA’s motor finance complaints page.

Review Progress and Challenges

The review process has seen constructive engagement from the involved firms. Nonetheless, challenges persist, particularly with the timely provision of necessary data, often due to its dispersal across multiple systems or between lenders and brokers. Some firms have also failed to retain all pertinent records.

Notably, on April 3, 2024, Barclays initiated judicial review proceedings against the Financial Ombudsman Service’s decision to uphold a complaint related to DCAs.

The FCA acknowledges the uncertainty generated by this review and aims to provide clarity to both consumers and firms as swiftly as possible. This goal hinges on the prompt receipt of comprehensive data from various firms and the progression and outcomes of any related litigation.

The FCA has committed to outlining the next steps by September 24, 2024, at the latest. If necessary, the review period and the pause on complaints may be extended.

Throughout this process, the FCA remains committed to its dual objectives of ensuring fair treatment for consumers and the proper functioning of the markets.

FCA pauses motor finance complaints amid legal dispute

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