The Financial Conduct Authority (FCA), has announced an extension for motor finance companies to respond to customer complaints concerning overcharging on commission when purchasing a vehicle. This decision comes as the FCA considers a potential redress scheme for affected consumers.

In 2021, the FCA banned incentives for brokers to increase the interest rate paid by customers on their motor finance agreements. Since the banning, numerous customers have filed complaints seeking compensation for unfair commission arrangements that were made prior to its implementation.

In January, the FCA acknowledged the growing tensions between consumers and motor finance providers regarding discretionary commission arrangements (DCAs) used in financing car purchases and stated its intention to investigate the matter further.

Originally, the FCA had planned to outline its next steps by September. However, the timeline has now been extended to May 2025, as many motor finance companies are encountering difficulties in producing the required data for the FCA to review, which includes records spanning 14 years.

“By then, we expect to have analysed the data we have collected from firms and assessed the outcome of the Barclays judicial review of the Financial Ombudsman’s decision to uphold a DCA complaint,” the FCA stated.

The FCA is considering the possibility of a redress scheme and has decided to pause complaint handling until 4 December 2025 to allow sufficient time to finalise the implementation details.

Lloyds Banking Group, one of the largest motor finance providers, has set aside £450 million to cover potential redress costs.

Industry analysts estimate that the total compensation for the sector could reach £16 billion, marking it as the most significant consumer banking scandal since the mis-selling of payment protection insurance (PPI).

FOS opposes Barclays’ judicial review in motor finance mis-selling case

“FCA extends deadline for motor finance complaint responses” was originally created and published by Motor Finance Online, a GlobalData owned brand.

 

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