Update on motor finance claims

The FCA is proposing to extend the current pause on the time firms have to respond to motor finance complaints involving discretionary commission arrangements (DCAs).

The FCA plans to set out the next steps in its review of the past use of DCAs by May 2025. By that point, the FCA expects to have analysed the data collected from firms and assessed the outcome of the Barclays judicial review regarding the Financial Ombudsman’s decision to uphold a DCA-related complaint.

The next steps could involve consulting on a redress scheme. To prepare for this possibility, the FCA intends to take the precautionary step of extending the pause on complaint handling until 4 December 2025. This will allow time to confirm how firms would implement such a scheme. Alternatively, if the FCA decides firms should resume handling complaints as usual, it will consult on ending the pause earlier.

If possible, the FCA will provide its proposed next steps before May 2025.

FCA Review

On 11 January 2024, the FCA announced a review to determine whether motor finance customers were overcharged due to the past use of DCAs.

At that time, the FCA paused the 8-week deadline for motor finance firms to provide a final response to relevant customer complaints. This pause was introduced to avoid inconsistent and inefficient outcomes for consumers, and to prevent adverse impacts on firms and the market while the issue was assessed.

The FCA is currently analysing thousands of records, spanning 14 years, to understand how DCAs affected the cost of credit for those financing vehicle purchases. Firms have been cooperating, but many have faced challenges in providing the necessary data due to issues such as older data not being retained, or information being spread across multiple systems or entities. Despite these delays, the FCA now has the required data. However, this has impacted the timeline, and the FCA will not be able to announce its next steps by September 2024, as initially anticipated.

Additionally, Barclays Partner Finance has initiated judicial review proceedings against the Financial Ombudsman Service’s decision regarding its use of a DCA. A court hearing is expected in the autumn, which will address legal issues relevant to the FCA’s review. Further court rulings in related cases are also anticipated, which may influence the FCA’s decision-making process.

Complaints Handling Pause

In light of these developments, the FCA is proposing to extend the current pause on the 8-week deadline for firms to respond to motor finance complaints involving a DCA. Under the new proposals, firms would not be required to issue a final response to DCA complaints before 4 December 2025.

This extended pause gives the FCA time, if needed, to design, consult on, and implement a redress scheme for DCA complaints. While it is still too early to confirm whether such an intervention will be necessary, the likelihood has increased based on the FCA’s work so far. The FCA views this approach as preferable to introducing a shorter pause, which could create further uncertainty or the need for additional extensions.

Should the FCA decide not to introduce an alternative approach to dealing with complaints, it will consult on ending the pause earlier, allowing firms to resume handling complaints in the usual manner.

The FCA intends to publish the findings of its review and any proposals for handling DCA complaints by the end of May 2025. The FCA’s focus will be on ensuring consumers are fairly compensated while maintaining a well-functioning, competitive motor finance market.

Making a Complaint

While the pause gives firms more time to handle DCA-related complaints, consumers are still able to submit complaints to their providers, and relevant time limits still apply. The FCA is also proposing to give consumers until the later of 29 July 2026, or 15 months from the date of their final response letter, to refer complaints to the Financial Ombudsman Service. This extension will ensure consumers are not forced to decide before the FCA announces its next steps.

We can still submit a complaint on your behalf but may not receive a response until after the FCA has completed its review.