The move follows court rulings that made dealer commissions without customer consent unlawful
The Financial Conduct Authority (FCA) plans to consult on extending the deadline for motor finance firms to respond to consumer complaints involving non-discretionary commission arrangements.
The consultation is expected within two weeks, with any proposed changes potentially in effect by mid-December 2024.
The move follows the October 25 Court of Appeal ruling in three cases, which found it unlawful for car dealers to receive commissions from lenders without obtaining informed consent from customers. The judgment clarified that customers must be told all relevant details, including the amount and calculation of the commission. This applies to both fixed and discretionary commission arrangements, though the latter were banned by the FCA in 2021.
In light of the judgment, the FCA has engaged extensively with the industry, holding an industry roundtable and consulting with 63 firms, as well as consumer representatives. The regulator anticipates a surge in complaints as a result of the ruling and is exploring the extension to ensure these complaints are handled efficiently and fairly, avoiding inconsistent or chaotic outcomes for consumers and firms alike.
The two lenders involved in the cases intend to appeal the decision. The proposed extension would cover at least the period until the Supreme Court decides whether to grant permission for appeal. The FCA has asked the Supreme Court to expedite its decision and, if permission is granted, has indicated it may participate in the proceedings to provide its expertise on the matter.
In the interim, the regulator expects motor finance firms to prepare resources to manage complaint responses once any extension ends. Companies may also need to evaluate whether financial provisions are necessary to address potential compensation liabilities.
The FCA has also been conducting a separate review into historical discretionary commission arrangements in motor finance, launched in January. The review aims to determine whether there was widespread misconduct in these arrangements prior to the 2021 ban, assess any resulting consumer harm, and identify appropriate compensation solutions if needed.
Earlier this year, the FCA extended complaint deadlines for cases involving historical discretionary commissions to allow time for its review. In September, this extension was pushed further, now lasting until December 4, 2025, due to delays in gathering required data. The FCA stated that it would consider the Court of Appeal’s recent ruling and other relevant legal decisions before finalising next steps in the review.
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