FCA Launches Major Review of Motor Finance Practices

Motor finance claims have long been a hot topic for law firms who have been awaiting the outcome of several Ombudsman (FOS) decisions which in turn would prompt a further review of the industry practice by the Financial Conduct Authority (FCA).

Last week the FCA confirmed that they have commenced a comprehensive review to enable them to determine possible compensation owed to individuals who have been charged excessively for motor finance before the ban of discretionary interest commission models in 2021. This investigation comes following many motor finance companies unjustly rejecting potentially valid claims against the lenders. The amount of compensation that individuals might receive will depend on various factors, including the cost of the vehicle, the applied interest rate, and the contract duration. It’s been quoted that a claimant could receive anything up to £3,000 per claim and due to the nature of PCP agreements, it is likely that the claimant will have more than one.

Those with a motor finance agreement held over the past few years might have incurred higher costs due to undisclosed commissions charged by their lender or the dealer - it is this practice that the FCA are now going to investigate fully, to ensure consumers are treated fairly. In order to allow them to do this thoroughly, the FCA has temporarily paused the deadline that motor finance firms have to respond to complaints regarding discretionary commission, this pause is likely to be lifted in September 2024.

The FCA’s decision to investigate is welcomed by Claimant Firms and the consumers they represent as it is a pivotal move against lenders and brokers who have been manipulating interest rates in order to inflate their commissions.