Motor Finance Complaints

The Financial Conduct Authority (FCA) has recognised an increase in complaints relating to regulated credit motor finance agreements (such as Personal Contract Purchase and Hire Purchase agreements) involving discretionary commission arrangements (DCAs). A large number have been referred to the Financial Ombudsman Service (FOS), of which some have now been upheld.

FCA Motor Finance Review into Commissions

The FCA is concerned that a ‘complaint-led’ approach to redress could result in disorderly, inconsistent and inefficient outcomes for both consumers and the motor finance market.

The Authority has therefore initiated a Skilled Persons Review of firms’ past practices using its powers under s166 FSMA. While this takes place, a 37-week pause on the usual rules applying to the handling of complaints has been initiated relating to motor finance complaints in relation to all regulated motor finance agreements (PCP and HP agreements) with discretionary commission arrangements in place between the lender and broker of the finance agreement.

This pause will take place from the 11th January 2024 until the 25th September 2024 and will allow for the FCA to decide whether redress should be provided through complaints or an alternative approach. The period for referring complaints to the FOS has been extended from 6 months to 15 months.

The review aims to distinguish whether there is likely to have been a widespread failure to comply with requirements, and whether harm has therefore been caused to customers. The FCA will then also distinguish how many customers may be owed redress and the potential amount that could be owed.
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FAQs

What kind of complaints does the FCA’s pause of requirements apply to?

The pause on requirements applies to complaints about motor finance agreements with DCA’s between the broker and the lender. The regulated credit agreement must have been taken out before the 28th January 2021 and have financed the purchase (including hire purchase) of a motor vehicle.

The firm must have received the complaint between the 17th November 2023 and the 25th September 2024 inclusive.

What kind of complaints does the pause of requirements not apply to?

Civil claims
Complaints already referred to FOS
Complaints that are not about motor vehicle finance (e.g. caravans or agricultural tools)
Complaints that have already received a final response

Does the pause apply to complaints relating to regulated hire (PCH)?

No, as per the FCA’s Policy Statement (PS24/1 2.2) this does not currently impact PCH agreements.

How long is the pause on the usual requirements requiring firms to respond to complaints from customers within 8 weeks? Why have they decided to pause the requirements?

The pause will take place from the 11^th January 2024 until the 25^th September 2024 inclusive. This will allow for the FCA to decide whether redress should be provided through complaints or an alternative approach.

Has the period for referring such complaints to the FOS been extended during the pause?

Yes, the period for referring complaints to the FOS has been extended from 6 months to 15 months.

What time limits apply?

For complaints relating to DCA received between the 17 November 2023 and 25 September 2024 inclusive, there is no requirement to send a final response to the complainant within 8 weeks.

DISP requirements will still apply to those who choose to continue to send final responses during this period and complainants will then be able to refer their complaint to FOS.

Unless the pause is extended, complaint response periods will begin again on the 26 September 2024.

Firms are encouraged to continue to progress DCA complaints during the pause by investigating and collecting evidence to support the eventual resolution.

I only offer PCH agreements, are my customers likely to contact me about this?

Yes, we expect that brokers will receive higher volumes of communication from customers than usual as they will want to distinguish if they have an agreement that could be impacted by the review. The FCA expect firms to ensure they have enough resource to handle any additional queries.