At the start of this year, the Financial Conduct Authority (FCA) initiated a comprehensive review into motor finance, igniting speculation about the potential implementation of a significant redress scheme akin to the payment protection insurance (PPI) debacle.

Central to the current discourse are discretionary commission arrangements (DCAs), which played a key role in approximately three-quarters of all car financing deals over the period from 2007 to 2020. Notably, the FCA took decisive action by prohibiting DCAs in 2021, signalling a significant shift in regulatory focus.

In January 2024, the FCA issued a statement underlining its commitment to addressing any instances of widespread misconduct that may have disadvantaged consumers. It emphasised its resolve to ensure that affected individuals receive appropriate settlements, highlighting the gravity of the situation.

Under the authority vested in it by s.166 of the Financial Services & Markets Act, the FCA is empowered to conduct a thorough review of historical motor finance commission arrangements and sales across multiple firms. This comprehensive investigation aims to shed light on the practices adopted by individual firms in response to the incentives stemming from DCAs and their impact on consumers.

In a bid to streamline the complaints handling process, the FCA has introduced temporary rules around DCAs. These rules afford motor finance firms extended response times to complaints and provide consumers with an expanded window to lodge their grievances. Notably, these measures apply to complaints received by firms between November 17, 2023, and September 25, 2024.

What do firms need to do?

Firms are required to ensure compliance with the updated rules outlined in the Dispute Resolution: Complaints Sourcebook (DISP) that concern their operations. This encompasses the revision of consumer-facing information regarding internal complaints handling procedures, including updates on their websites, and informing complainants about adjustments to time limits for handling complaints and referrals to the Financial Ombudsman Service (FOS).

While the Financial Conduct Authority (FCA) has temporarily suspended the time limit for complaints, it is encouraging firms to continue addressing complaints related to discretionary commission arrangements (DCAs) to the best of their ability. This involves ongoing investigation and evidence collection to facilitate their eventual resolution.

The FCA is directly communicating with lenders involved in its skilled person review. However, all firms operating in the motor finance sector, regardless of their initial inclusion in the review, should have strategies and resources in place to effectively respond to any additional complaints or regulatory interventions.

It’s important to uphold the principles of transparency, fairness, and consumer protection while dealing with the intricacies of regulatory scrutiny. Moving forward, collaboration and open dialogue among industry stakeholders will be crucial to safeguard the interests of all parties involved.

Get In Touch

Eddie works with a highly skilled team to deliver industry specific advice to the asset finance and leasing sector.

Eddie and his team advise clients on a wide range of issues concerning leasing, hire, consumer credit, the FCA source book and the regulatory landscape affecting the UK finance and leasing sector.

Written By

Published: 8th March 2024
Area: Asset Finance

How We Can Help

Debt Recovery

Our team is ready to help and guide you through debt recovery in a cost-efficient way to keep your business financially resilient and running smoothly.

Asset Finance

Our team of asset finance experts combine in-depth sector expertise with comprehensive knowledge of the banking and finance sector.

Our Latest Debt and Asset Finance Updates

Our experts are here to answer any questions you might have

If you’d like to speak to a member of our team, please fill out the enquiry form. We will aim to reply to your query within 2 hours

Need to talk to someone sooner? You can call using the number below

Call Us: 0330 024 0333