FCA's Motor Finance Review: Extended Deadlines and Industry Impacts
In January 2024, the Financial Conduct Authority (FCA) launched a review to determine if motor finance customers had been overcharged due to discretionary commission arrangements (DCAs). This investigation emerged from growing concerns that motor finance companies were unjustly rejecting mis-selling claims against lenders.
Initial Announcement and Suspended Deadlines
When the FCA announced the review, they also suspended the eight-week deadline for motor finance firms to respond to complaints. Initially, it was anticipated that the FCA would provide a resolution by 26 September 2024. However, in recent weeks, there have been increasing “rumblings” from the industry hinting at a possible extension of this date.
Recent Developments
On 30 July 2024, the FCA issued an additional statement, officially extending the deadline. The FCA cited two main reasons for this extension:
Data Provision Challenges: Motor finance firms have been cooperative but have struggled to provide the necessary data on time. The challenges include older data not being stored and data being spread across multiple systems or between lenders and brokers.
Judicial Review Proceedings: Barclays Partner Finance has initiated judicial review proceedings against the Financial Ombudsman Service's decision to uphold a complaint related to its use of a DCA. The FCA indicated that the outcome of this case, expected in the autumn, could significantly impact their investigation.
As a result, the FCA has proposed extending the resolution deadline to May 2025, allowing firms until at least 4 December 2025, to provide their final response.
Implications for Consumers and Firms
Although it is too early to confirm how the FCA may approach any redress deemed appropriate for consumers, what has become clear is the potential number of claims that may arise in 2025 and beyond. The DCA model appears to have been far more widespread than initially thought, potentially affecting many millions of consumers.
With the volume of cases expected to be similar to the PPI mis-selling scandal, firms will want to retain and build their client base now so they can act quickly and efficiently once the FCA decides on an appropriate route in May 2025.
How We Can Help
When the FCA confirms the process for motor finance claims, firms that take proactive steps now will be ahead of the competition. By using our solution, firms can ensure they are prepared to handle a high volume of claims efficiently and effectively.
To assist firms during this period we’ve come up with some creative fee structures to help firms build the biggest possible book of claimants. After all, the firms who act early, as we saw with PPI, be the biggest winners in the market. If you would like to discuss how we can support your firm, please contact me.
Author: Sare Brownhill
Sare has worked in civil litigation for 24 years, in her career she has been both a litigator and latterly Head of Litigation. She is a qualified Legal Executive. She now dedicates her time to helping firms thrive within the constraints of CFAs, DBAs and fixed fees by using best in class automation to maximise claimant engagement and automate repetitive, costly work.
