FCA delays motor finance review to May 2025

UPDATED: The Financial Conduct Authority (FCA) has shifted the deadline for completing its review into discretionary commission arrangements (DCA) in the motor finance market to May 2025, meaning lenders will be waiting some eight months later than originally forecast to find out the details of any redress schemes. Difficulties with obtaining the necessary data and ongoing legal challenges are cited as factors in the decision.

In January this year the regulator launched its review following two decisions by the Financial Ombudsman Service (FOS) relating to car finance arrangements, which triggered an avalanche of consumer complaints. At the time, the regulator said it would deliver its outcomes by 24th September.

With two months to go to that deadline, the FCA has put out a statement saying: “We now intend to set out next steps in our review into the past use of DCAs in May 2025. By then, we expect to have analysed the data we have collected from firms and assessed the outcome of the Barclays judicial review of the Financial Ombudsman’s decision to uphold a DCA complaint.”

The FCA is also proposing to extend the current pause to the time firms have to respond to consumers about motor finance complaints involving a discretionary commission arrangement (DCA). Firms will not have to issue a final response to DCA complaints until after 4th December 2025 at the earliest.

In addition, consumers will now have until the later of 29th July 2026 or 15 months from the date of their final response letter from the firm, to refer a complaint to the FOS (instead of the usual six months). The FCA said this is so consumers will not have to decide whether to refer their complaint to the FOS before the regulator announces the next steps.

The FCA said: “Our next steps could involve consulting on a redress scheme. This is why we intend to take the precautionary step of pausing complaint handling until 4th December 2025, as it may take until then to confirm how firms would implement it. Or it could involve asking firms to start dealing with complaints again as usual, in which case we would consult on ending the pause earlier.

“If we can set out our proposed next steps sooner, we will.”

The FCA pointed out it is assessing thousands of records spanning 14 years, noting that “firms involved in our review have engaged with us constructively, but many have struggled to supply the data we need within the requested time.”

 Reasons for this include firms not keeping older data, and data being stored on multiple systems, or being spread between lenders and brokers.

Furthermore, Barclays Partner Finance has also started judicial review proceedings of one of the FOS decisions which triggered the review. The FCA says a hearing is expected to take place in the autumn, where the court will consider whether to grant permission and hear the claim.

The FCA noted that “The judicial review will consider legal issues highly relevant to our review. We are also expecting judgments soon in other cases heard by the Court of Appeal that may be relevant in determining our next steps.”

Responding to the Financial Conduct Authority’s (FCA) announcement of an extension to the pause on discretionary commission complaints (DCA) handling, Stephen Haddrill, Director General of the Finance & Leasing Association, said: “This was expected and is a sensible measure considering the complex timelines of parallel proceedings, including the Judicial Review of the Financial Ombudsman Service’s decision in a prior DCA case. 

“We welcome the FCA’s comment that it is more likely now that they will intervene to deal with DCA complaints than when they started the review – such an intervention should remove the inconsistent outcomes we have seen in previous complaints cases and ensure market integrity. 

“Motor finance is a vitally important product, valued by millions of customers.  We need a solution that identifies and quickly resolves genuine complaints, while providing lenders the certainty and clarity to reject the vast number of speculative complaints made by claims management companies.”