We have extended the time firms have to
respond to complaints about motor finance agreements not
involving a discretionary commission arrangement (DCA). Firms now
have until after 4 December 2025 to provide a final response to
non-DCA complaints, in line with the extension we have already
provided for complaints involving DCAs.
The extension follows the judgment of the Court of
Appeal on 25 October 2024 in 3 motor finance cases. In that
case, the Court decided it was unlawful for the car dealers to
receive a commission from lenders providing motor finance without
first telling the customer about the commission and getting their
informed consent to the payment. The focus of the Court of Appeal
decision was common law, equitable principles and the Consumer
Credit Act, rather than FCA rules.
Firms who provide motor finance are likely to receive a high
volume of complaints in response to the judgment. We have
extended the time firms have to handle complaints to help prevent
disorderly, inconsistent and inefficient outcomes for consumers
and firms.
On 11 December 2024, the Supreme Court confirmed it would
hear an appeal against the Court of Appeal's judgment. We
previously wrote to the Court asking it
to decide quickly whether it will give permission to appeal and,
if it does, to determine the substantive appeal as soon as
possible. We plan to apply to formally intervene in the case to
share our expertise to assist the Court.
While the Supreme Court will hear an appeal, firms must still
comply with the law as it stands when arranging new motor finance
agreements. To assist firms, we have set out a summary of
the Court of Appeal decision, our expectations and some good and
poor practice examples.
Making a complaint
Any consumers concerned that they weren't told about commission
and may have paid too much for their car finance, should complain.
We have also confirmed that consumers will have until the later
of 29 July 2026 or 15 months from the date of their final
response letter from the firm, to refer a non-DCA complaint to
the Financial Ombudsman (instead of the usual 6 months).
Following feedback received during our consultation, we have
confirmed the complaint handling extension will cover motor
leasing, as well as motor finance credit agreements. The Court of
Appeal's judgment did not involve motor leasing agreements.
However, consumers also use leasing to access motor vehicles, and
it is important that consumers using similar products for similar
purposes are treated in the same way.
FCA review into historical DCAs in motor
finance
In January this year, we launched a review of
historical motor finance DCAs.
The review seeks to understand if there was widespread misconduct
related to DCAs before the 2021 ban, if consumers have lost out
and, if so, the best way to make sure appropriate compensation is
paid in an orderly, consistent and efficient way.
Alongside the review, motor finance firms were given more time to
provide final responses to complaints about motor finance where a
DCA was involved, and consumers more time to refer their
complaints to the Financial Ombudsman. This was to prevent
disorderly, inconsistent and inefficient outcomes for consumers
and knock-on effects on firms and the market while we reviewed
the issue and determined the best way forward.
In September, we further extended this until
4 December 2025. This was because it had taken longer than
expected to get the data needed for the review. Before deciding
our next steps, we also wanted to take account of relevant court
decisions. These included the judicial review by Barclays
Partner Finance of a Financial Ombudsman decision relating to a
DCA in a motor finance agreement and the recent Court of Appeal
judgment.
We plan to set out next steps in our review of DCAs in May 2025.
We hope to also provide an update on motor finance non-DCA
commission complaints at the same time. However, given the Court
of Appeal's judgment affects both types of complaint, what we can
say in May will depend on the progress of the appeal to the
Supreme Court and the timing and nature of any decision. If we
can end the complaint handling extension sooner than December
2025, we will.
Motor finance is an important market, serving over 2 million
consumers a year. In deciding next steps, we'll consider how to
make sure affected consumers are appropriately compensated and
the market continues to work well, with effective
competition.
