- The FCA will use its powers under section 166 of the Financial Services and Markets Act 2000 to investigate past vehicle finance fee arrangements and sales across a number of companies.
- Final responses to related customer complaints will be suspended until a deadline of 8 weeks from January 11, 2024. The suspension will last him 37 weeks.
- The suspension applies to complaints received by businesses after November 17, 2023 and until September 25, 2024.
- Consumers will also have up to 15 months to lodge a complaint with the FOS, instead of the usual six months, depending on when they receive the final response.
- The FCA plans to issue its next measures by September 24, 2024 at the latest. It warns that if a company determines that it has a duty to redress a large number of customers, it may need to intervene, such as establishing an industry-wide consumer redress scheme.
Read below for more information on FCA's announcement.
Why did the FCA decide to take action?
On 11 January 2024, the FCA issued a policy statement (PS24/1) as well as a press release announcing the work it is undertaking in the car finance market.
Discretionary commission arrangements (DCAs) were banned by the FCA in 2021, removing the incentive for brokers to increase the interest rates their customers pay. Meanwhile, even before the ban was introduced, there were a number of customer complaints related to DCA. Companies reject most complaints because they believe they are not acting unfairly or causing harm to customers based on relevant legal and regulatory requirements, but many consumers agree with this decision. I have not.
The Financial Ombudsman Service (FOS) has considered several dismissed complaints and has found in favor of complainants in two recent decisions (here and here). This is likely to result in a significant increase in complaints from consumers to companies and FOS. Complaints were also filed in county court, and some were granted.
This means that there are significant disputes between some companies and their customers over whether those companies have violated legal and regulatory requirements. As a result, the FCA has announced that it will use its powers under section 166 of the Financial Services and Markets Act 2000 (FSMA) to investigate past motor vehicle finance fee arrangements and sales across multiple companies.
Suspend 8 week deadline for final response
From 11 January 2024, the FCA will suspend the eight-week deadline for motor finance companies to provide a final response to DCA complaints. This is to prevent chaotic, inconsistent and inefficient outcomes for consumers, as well as knock-on effects for businesses and markets, while the FCA assesses the issue and determines the best course of action.
The suspension has been introduced without consultation. This period lasts for 37 weeks (approximately 9 months) and applies to complaints received by businesses after November 17, 2023 and before September 25, 2024. For example, if a company has been responding to his complaint for three weeks at his eleventh hour, in January 2024, after the suspension ends, the company will have five weeks left to respond. The FCA may need to extend the moratorium if more time is needed to ensure that complaints are properly dealt with and that potential consumers receive compensation.
However, the FCA encourages companies to continue investigating and gathering evidence to help reach a final resolution, and (where possible) to continue handling complaints during the suspension. The new rules also include a requirement to keep complainants informed of changes to the grievance processing period.
Consumers will also have up to 15 months to lodge a complaint with FOS, instead of the usual six months, if they receive a final response between July 12, 2023 and November 20, 2024. .
Where the FCA determines that a business has a redress obligation to a large number of customers, it determines that providing redress through a consumer complaint will not lead to the best outcome for consumers or the effective functioning of the market. I warned you that this is a possibility. Instead, intervention with alternative approaches may be required. for example:
- Utilizes authority under FSMA Section 404 to establish an industry-wide consumer redress regime.or
- We commonly apply to the Financial Markets Test Case Scheme to help resolve important contentious legal issues.
Affected businesses must ensure compliance with all regulations relevant to their business listed in Appendix 1 of the Policy Statement.
The FCA welcomes feedback on the impact of the Regulations and their approach to providing remedies for harm caused by DCA more generally.Feedback can be sent to email@example.com up to and including March 11, 2024.
FCA plans to take next steps in its next phase. September 24, 2024 At the latest. This includes whether the FCA needs to extend the suspension or make other changes.