The Financial Conduct Authority (FCA) has written to motor finance firms regarding the financial impact of its review into historical commission arrangements. Firms are being prompted to set budget aside to handle and resolve complaints that may arise as a result of the review.
The Dear CEO letter notes that the FCA has observed firms taking ‘different approaches’ to account for the potential impact on their financial resources that its review may have.
The authority outlines that it expects all firms to plan for additional operational costs from increased complaints and the potential cost of resolving complaints.
The FCA plans to continue its supervision and will be selecting firms to be involved in additional data collection.
The FCA outlines that firms should (with immediate effect):
- Assess the adequacy of their financial resources
- Ensure accuracy of financial statements and regulatory reporting
- Make adequate disclosures to the FCA
- Make adequate disclosures to group stakeholders
- Deal with DCA complaints and DSAR’s appropriately.
Dear CEO letter: Maintaining adequate financial resources (fca.org.uk)
Information for firms on motor finance complaints (fca.org.uk)
Members’ questions can be sent to [email protected]
Meanwhile, from a consumer perspective, new research from the FCA has found that while many are struggling to meet financial commitments, the picture has improved over the last year. The regulator found 7.4m people were struggling to pay bills and credit repayments in January 2024, down from 10.9m in January 2023. This is still higher than the 5.8m recorded in February 2020, before the cost of living squeeze began.
In the 12 months to January 2024, 2.7m adults sought help from a lender, a debt adviser or other financial support charity because they found themselves in financial difficulty. Nearly half (47%) of those that sought help said they were in a better position as a result. However, 2 in 5 adults who had fallen behind on their bills said they had avoided talking to their lender about their finances.
The FCA has reminded financial firms they must support their customers and work with them to manage payment difficulties. The regulator has cracked down where firms haven’t met its expectations, securing nearly £60 million in compensation for 270,000 customers.
Improving picture for personal finances, but many still struggling (fca.org.uk)
