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    FCA Updates Guidelines on Handling Motor Finance Complaints

    02/10/2024

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    The Financial Conduct Authority (FCA) has provided updated guidance for both firms and consumers regarding motor finance complaints. The information aims to help ensure that motor finance providers adhere to clear standards when addressing customer concerns, and it outlines the rights consumers have in raising complaints.

    Key Points from the FCA’s Motor Finance Complaints Guidance

     

    1. Firms’ Responsibilities

    The FCA sets out specific responsibilities for motor finance firms, including the requirement to handle complaints fairly, promptly, and transparently. Firms must have a clear complaints procedure that allows customers to easily raise concerns. They are expected to investigate complaints thoroughly and provide a final response to the consumer within eight weeks of receiving the complaint.

     

    2. Consumers’ Rights

    Consumers are encouraged to first approach their motor finance provider if they have a complaint about their agreement. The FCA emphasises that if the issue is not resolved satisfactorily, consumers have the right to escalate their complaint to the Financial Ombudsman Service (FOS). This service is free and impartial, providing an additional layer of protection for consumers.

     

    3. Common Issues in Motor Finance Complaints

    Complaints in the motor finance sector often involve issues like affordability assessments, unclear terms, or problems with the sales process. The FCA expects firms to take reasonable steps to ensure that customers fully understand the terms of their agreement and that proper affordability checks are carried out before financing is offered.

     

    4. Resolution and Escalation

    If a consumer feels that their complaint has not been handled appropriately by the motor finance firm, they can refer the case to the FOS. The FCA highlights that the Ombudsman can investigate and, if necessary, instruct the firm to provide redress or take corrective action. Decisions made by the FOS are binding on firms, helping ensure fair outcomes for consumers.

     

    Timeline

    The FCA has been actively involved in regulating motor finance since the mid-2010s, responding to concerns about unfair practices in the industry. In 2019, the FCA launched a review of motor finance products, culminating in a consultation in 2020 aimed at improving transparency and fairness. By 2021, the FCA implemented new rules requiring clearer communication of credit terms and more stringent assessments of borrowers’ ability to repay. As part of its ongoing commitment to consumer protection, the FCA continues to monitor the sector, ensuring that firms adhere to these standards and addressing any emerging issues related to motor finance claims.

     

    Timeline Summary

    Original Deadline: September 25, 2024

    Firms were initially required to provide a final response to DCA complaints within eight weeks, after which complainants could escalate their issues to the Financial Ombudsman.

    Proposed Extension: December 4, 2025

    The requirement for firms to provide a final response is proposed to be extended, allowing additional time for resolution before complaints can be escalated.

    Consumer Notification Requirements: Ongoing

    Firms must keep consumers informed about the ongoing pause and any relevant updates regarding their complaints.

    Consumer Decision Timeframe: Until July 29, 2026

    Consumers who receive a final response on relevant complaints will have until at least this date to decide whether to refer their complaint to the Financial Ombudsman.

    Record Maintenance Requirements: Until April 11, 2026

    Firms are required to maintain and preserve relevant records related to DCA complaints until this date, ensuring compliance and accountability.

    This timeline reflects the regulatory framework surrounding DCA complaints and the ongoing measures to protect consumer rights.

    The FCA’s guidelines serve to protect consumers and ensure that motor finance firms act responsibly when addressing complaints. The clear process for managing and escalating complaints provides a pathway for consumers to have their issues resolved efficiently and fairly. For more information, consumers and firms alike can refer to the detailed guidelines available on the FCA’s website here.

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