On 30 July 2024, the Financial Conduct Authority (FCA) published an update on its motor finance work and a consultation paper (CP24/15) on extending its temporary changes to handling rules for motor finance complaints.

Background

In January 2024, the FCA announced that it was carrying out a review of the historical use of discretionary commission arrangements (DCAs) in the motor finance sector. At the same time, it published Policy Statement PS24/1 setting out temporary changes to the complaints handling rules for motor finance firms, including pausing (for 37 weeks) the requirement on firms to provide a final response to a complaint about motor finance agreements with DCAs within 8 weeks of receiving the complaint, and extending the time consumers have to refer DCA complaints to the Financial Ombudsman Service (FOS) from 6 to 15 months, if the firm sent its final response to the complaint within the period specified in the rules.

The FCA also said at that time that it would communicate a decision on its next steps by 24 September 2024 at the latest, including whether to extend the pause or make other changes.

Update on motor finance work

In its update, the FCA explains that it now intends to set out its next steps regarding its review into the past use of DCAs in May 2025.

It also notes that its next steps could involve consulting on a redress scheme, and for this reason the FCA intends (subject to CP24/15) to take the precautionary step of pausing complaint handling until later in 2024, as it says it may take until then to confirm how firms would implement the scheme. The FCA does also flag, however, that its next steps could involve asking firms to start dealing with complaints again as usual, in which case it would consult on ending the pause earlier.

The FCA’s proposals

In CP24/15, the FCA sets out its proposals to extend its temporary complaint handling rules for DCA complaints in the motor finance industry, on the basis that it has taken longer to collect and review the data than planned, and that there is also ongoing litigation. The proposals are to:

  • Extend the complaint handling pause until 4 December 2024.
  • Give complainants who are sent a final response to a DCA complaint until at least 29 July 2026 to decide whether to refer their complaint to the FOS.

The FCA recognises that while it considers it necessary to continue to pause complaint handling, this will mean that many consumers who have complained to firms about DCAs have now been waiting a long time. It is therefore consulting on the change.

The deadline for responding to CP24/15 is 28 August 2024. The FCA intends to consider comments received and to publish its feedback, along with final rules, in a policy statement by 24 September 2024.