In July this year the FCA announced that, following the launch of a review of historical motor finance commission arrangements and sales across several firms (January 2024), it was pushing back the timing for publication of the review findings to May 2025 (rather than September 2024). The related pause on the consideration of new complaints is also being extended to 4 December 2025. The FCA has now published a policy statement following its related consultation on extending the temporary changes to handling rules for motor finance complaints. Affected firms should note that the FCA has reiterated its view that, while it’s too early to say whether any redress intervention will be necessary, based on its work so far it thinks it is more likely than when it started its review. On the plus side, it agrees with stakeholders’ concerns about ensuring that, if it decides to consult on a consumer redress scheme, firms have enough time to implement and operationalise the scheme before they start reviewing historic cases.
Of particular interest to: Motor finance providers, motor finance credit brokers, including motor dealers.
Key takeaways
- In its July 2024 consultation paper, the FCA consulted on extending the following rules relating to handling of complaints about motor finance discretionary commission arrangements (DCA complaints) that it made in policy statement PS24/1 (January 2024):
- the pause on the requirement for firms to provide a final response to DCA complaints within 8 weeks, giving complainants the right to go to the Financial Ombudsman Service (FOS) – this was due to end on 25 September 2024 and the FCA proposed extending it until 4 December 2025;
- requirements to keep consumers informed about the pause;
- the timeframe for consumers who receive a final response on relevant complaints to decide whether to refer their complaint to the FOS – the FCA proposed this should run until 29 July 2026 at the earliest;
- requirements to maintain and preserve relevant records – the proposal was that these should remain in place until 11 April 2026.
- The FCA’s policy statement confirms that it is proceeding with all the proposals it consulted on. The Dispute Resolution: Complaints Sourcebook (Motor Finance Discretionary Commission Arrangement Complaints) (Amendment) Instrument 2024 has also been published and came into force on 26 September 2024.
- If the FCA decides that the pause should end earlier than 4 December 2025, it would consult on this change separately.
- The FCA states that it’s still too early to say whether an alternative approach to redress will be needed. However, it agrees with stakeholders’ concerns about the need to ensure that, when the pause ends (whether on or before 4 December 2025), complaints that have built up can be dealt with in an orderly manner. It also agrees with stakeholders’ concerns about ensuring that, if it decides to consult on a consumer redress scheme, firms have enough time to implement and operationalise the scheme before they start reviewing historic cases.
- Table 1 on page 19 of the policy statement is designed to help firms and consumers understand the time consumers will have to refer their complaint to the FOS. For example, consumer who have been sent a final response to their DCA complaint during the period beginning 12 July 2023 and ending 25 September 2024 (‘Group A’ consumers) can refer a complaint to the FOS up to and including 29 July 2026. For consumers in this group, the FCA also highlights that firms will be required to write to them to let them know that the deadline in their final response has been extended to 29 July 2026.
- Regarding the requirements to maintain and preserve relevant records, the FCA explains that the decision to extend this rule by an extra 15 months to 11 April 2026 was made because this is consistent with the amount of time it is extending the pause by. If necessary, it will revisit this once it announces the next steps in its review and any further changes will be subject to consultation.
- There is a reminder that neither the original pause rules, nor the changes now being made, prevent consumers or their representatives from lodging DCA complaints with firms or taking legal action against them.
- The policy statement and a related FCA statement also highlight that the hearing relating to a judicial review of the FOS’s decision to uphold a complaint relating to its use of a DCA – in which the FCA is an interested party - will take place from 15-17 October 2024. It will be a ‘rolled-up hearing’, meaning that the court will consider whether to grant permission and, if so, then hear the claim. This is an approach commonly used by the court for urgent cases. The FCA hopes that a judgment will be handed down before the end of 2024.
Next steps
Firms affected by the changes must continue to comply with the rules in Appendix 5 of the Dispute Resolution: Complaints Sourcebook (DISP App 5) that are relevant to their business. The FCA webpage ‘Information for firms on motor finance complaints’ provides more information.
The FCA plans to set out next steps in its review in May 2025, by which time it expects to have analysed the data collected from firms and assessed the outcome of the current judicial review proceedings relating to the FOS’s decision to uphold a DCA complaint (as well as other potentially relevant litigation such as the 3 civil cases relating to motor finance commission heard by the Court of Appeal in early July and now awaiting judgment). At this point the FCA also expects to give more details on how complaints that have not had a final response should be dealt with.
[View source.]
