We set out and explain our response to a potential increase in complaints in the motor finance market.
Why we are changing
We are aware of a high number of complaints from customers to motor finance firms claiming compensation because of historical, potentially unfair, commission arrangements. The new rules will help us ensure our approach to providing any redress that is due to these customers leads to the right outcomes for consumers and the effective functioning of the motor finance market.
What we are changing
The new rules:
- pause, for 37 weeks, the requirement on firms to provide a final response to a complaint about motor finance agreements with discretionary commission arrangements (DCAs) within 8 weeks of receiving the complaint
- extend the time consumers have to refer DCA complaints to the Financial Ombudsman from 6 to 15 months, if the firm sent its final response to the complaint within the period specified in the rules
Who this is for
The rules in this policy statement are directly relevant to:
- motor finance providers
- motor finance credit brokers, including motor dealers
- consumers who have taken out motor finance agreements involving DCAs
- professional representatives bringing complaints to motor finance providers and credit brokers about DCAs, including claims management companies (CMCs) regulated by the FCA
They will also interest consumer organisations and trade bodies representing the motor finance and professional representative sectors.
The rules will come into force on 11 January 2024. This means firms do not have to provide final responses to DCA complaints within 8 weeks during the period beginning with 17 November 2023 and ending with 25 September 2024. However, we encourage firms to continue to progress DCA complaints where possible during this period by continuing to investigate and collect evidence to help with their eventual resolution.
What we will we do next
We plan to communicate a decision on our next steps by 24 September 2024 at the latest. This would include whether we extend the pause or make other changes.
What you need to do next
If your firm is affected by these changes, you must ensure that you comply with all the rules in Appendix 1 that are relevant to your business.
We welcome feedback on the impact of the rules and our approach to the provision of redress for harm caused by DCAs more generally. Feedback can be sent to [email protected] up to and including 11 March 2024.
The Financial Ombudsman Service recently issued decisions upholding DCA complaints. These decisions are likely to increase the number of such complaints from consumers to firms and the Financial Ombudsman.
We are urgently assessing whether the historic use of DCAs means a significant number of individuals could be due redress (compensation) from motor finance firms because they paid too much for their car loans.
If we find there has been widespread misconduct and that consumers have lost out, we will identify how best to make sure people that are owed compensation receive it in an orderly, consistent and efficient way.