The Financial Conduct Authority (FCA) has proposed extending the time firms have to respond to consumer complaints about motor finance.
Consultation
The FCA announced on Wednesday that it will be consulting on extending the amount of time firms have to respond to consumer complaints about motor finance where a non-discretionary commission was involved, and for consumers to refer them to the Financial Ombudsman Service.
Their proposals are expected to be published in the next two weeks, and if they decide to take the decision forward, it would mean we would see the complaint extension in next month.
“Motor finance firms are likely to receive a high volume of complaints in response to the recent Court of Appeal judgment. Any complaint extension would allow them time to consider how these might be efficiently and effectively handled. This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market.” – FCA Statement
Court of Appeal Ruling
The launching of this consultation follows from the Court of Appeal’s judgement in Hopcraft v Close Brothers Ltd, Johnson v Firstrand Bank Ltd, and Wrench v Firstrand Bank Ltd. This effectively stopped dealers from making commissions off car finance deals unless informed consent had been given by the consumer purchasing the vehicle. This judgement related to fixed commission in motor finance agreements and discretionary commission arrangements.
Since then, the FCA has spoken with 63 firms and discussed the implications with consumer representatives. Following the Court of Appeal’s ruling, the FCA has stated that that car finance providers were “likely to receive a high volume of complaints”, so an extension would allow companies extra time to help deal with these.
Martin Lewis’ Commentary
Martin Lewis commented on the news, saying that although not specified in the FCA’s announcement, he has had it confirmed that this proposal would apply to all car finance commission complaints, not just the Discretionary Commission Arrangement complaints that were previously covered.
“It signals that the FCA is paving the ground to, in future, broaden the scope of its car finance investigation, so not only does it look at the 40% of past claims that had DCAs (where dealers could increase their commission by increasing interest) but all commissions including fixed commissions.
This is on the back of the Court of Appeal ruling ‘consumers need to know all material facts including the amount of commission’, which they often weren’t told even in fixed commission cases.
It looks like (I need to dig) if the hold is extended, almost everyone who has had car finance deals may have a complaint (I need to examine timelines of what counts) and be potentially due money back (this includes those already rejected as they were told they ‘didn’t have a DCA’).”