FCA pause 8-week deadline for motor firms to provide a final response to relevant customer complaints

In 2020 the FCA banned discretionary commission arrangement in motor finance arrangements. The ban was designed to remove the incentive for brokers to increase the interest rate customers pay for their motor finance.

Finance firms saw a massive uptick in complaints from customers who had entered into motor finance arrangements prior to January 2021. 

The Financial Ombudsman and County Court have since seen thousands of claims and complaints being brought following receipt of a final decision letter, on the basis that the customer did not accept the final determination. Customers claimed that the commission arrangements contained secret commission or were unfair in terms of a breach of the Consumer Credit Act or Financial Services Markets Act. 

Two reported cases by the Financial Ombudsman have gone in favour of the customer as have many of the decided County Court Cases. 

The FCA are now using their S.166 powers to conduct a review of historical motor finance commission arrangements and sales across several firms. If they find misconduct, they will identify how compensation should be paid in a consistent manner. 

In order to prevent inconsistent decisions in the meantime, the FCA have introduced a pause in the requirement for firms to respond to complaints within 8 weeks. 

The pause applies to complaints about motor finance agreements where there was a discretionary commission arrangement between the lender and the broker and will last for 37 weeks. 

The pause applies to complaints received by firms on or after 17 November 2023 and or before 25 September 2024. 

Consumers will also have up to 15 months to refer their complaint to the Financial Ombudsman rather than the usual 6 months. This extension applies to complaints where the firm had sent final responses in the period beginning 12 July 2023 and ending 10 January 2024, or where the firm send a final response during the period beginning with 11 January 2024 and ending with 20 November 2024. 

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