The Financial Conduct Authority (FCA) has proposed extending the time motor finance firms have to address commission-related complaints. This move follows increased scrutiny of non-discretionary commission structures, often used in products like hire purchase (HP) and PCP agreements, after findings of potential consumer harm caused by undisclosed or excessive commissions.
The proposed extension, which could last until May or December 2025, seeks to address concerns that current deadlines are insufficient for firms to manage complaints effectively. It also aligns with broader regulatory efforts to improve fairness and transparency in the motor finance sector.
Motor finance firms now face a dual challenge: addressing historic complaints and ensuring future compliance. Many firms will need to enhance record-keeping, strengthen internal complaint-handling processes, and transition to clearer commission models. The FCA’s proposal provides an opportunity for the industry to rebuild trust and reduce the risks of disputes.
From the consumer perspective, the proposal extends the opportunity for individuals who may have been affected by unfair practices to seek redress. Customers often struggled to understand the impact of undisclosed commissions on their agreements, a problem exacerbated by the sector’s complexity.
The proposal stems from a Court of Appeal ruling that highlighted how undisclosed commissions may have led to consumer detriment. Firms now face the challenge of revisiting historic agreements and handling complaints with greater scrutiny. While the proposed extension to May or December 2025 offers breathing room, it underscores the need for firms to prioritise transparency and compliance going forward.
The FCA has invited feedback from stakeholders, including finance firms, brokers, and consumer groups, to determine the best way forward. This extension is part of the regulator’s ongoing commitment to ensuring that motor finance firms operate with greater accountability and that consumers are treated fairly.
For firms, this period is a chance to not only address past complaints but also to proactively implement systems that support compliance and transparency, ensuring long-term sustainability in a heavily regulated market.
Consultation Feedback
Responses to the consultation can be sent by using the online response form, emailing cp24-22@fca.org.uk, or in writing to:
Redress Policy Team
Financial Conduct Authority
12 Endeavour Square
London E20 1JN
Feedback must be sent by 5 December 2024.
The FCA are expected to publish its policy statement by 19 December 2024.
Learn more about the FCA’s consultation here.
