FCA extends timeframe for non-DCA consumer complaints

The Financial Conduct Authority (FCA) is consulting on plans to extend the time firms have to respond to consumer complaints about motor finance where a non-discretionary commission was involved, and for consumers to refer them to the Financial Ombudsman Service (FOS), following last month’s Court of Appeal ruling .

The proposals are expected to be published within two weeks and, if taken forward, would mean the complaint extension is in place by mid-December 2024.  

The move follows the 25 October judgment in Hopcraft v Close Brothers Ltd, Johnson v Firstrand Bank Ltd, and Wrench v Firstrand Bank Ltd.

Since then, the FCA says it has undertaken extensive industry engagement, including with the industry and government, and has spoken with 63 firms.

The FCA has already announced an extension to its review of historical motor finance discretionary commission arrangements (DCAs), launched at the beginning of the year.  This latest extension is in response to the Court of Appeal judgment which considered wider issues around commission disclosure and obtaining informed customer consent.

Announcing the proposed extension, the FCA said: “Motor finance firms are likely to receive a high volume of complaints in response to the recent Court of Appeal judgment. Any complaint extension would allow them time to consider how these might be efficiently and effectively handled. This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market.”

The regulator said the proposed complaint extension will cover at least the period until the Supreme Court decides whether to grant permission to appeal. The FCA will include options on the length of the proposed extension in its consultation.  

The FCA has also said it will write to the Supreme Court asking it to decide quickly whether it will give permission to appeal and, if it does, to consider it as soon as possible, given the potential impact of any judgment on the market and the consumers who rely on it. If permission to appeal is granted, the FCA will consider intervening to share its expertise to assist the Court.

The regulator has cautioned motor finance firms that they “will need to use the time provided to ensure they have the resources to issue final responses to complaints at the end of a proposed extension. Motor finance firms are also likely to need to consider whether they should make any financial provisions as complaints need to be handled in line with the law.” 

BMW Financial Services has become the latest lender to announce it has made provision for future claims, with its 2023 accounts setting aside £70 million.  The accounts were finalised before the Court of Appeal ruling, and note “considerable uncertainty” about the potential future liability facing the luxury car manufacturer’s finance partner.

Lloyds Bank, parent of Black Horse, set aside £450 million in February, while Investec has disclosed a £30 million provision and FirstRand, the South African owner of MotoNovo, one of the lenders involved in the Court of Appeal ruling, has allocated  £127.4 million for future claims.

The FCA has already extended the deadline for its DCA review, partly because of the time needed to get all the data, and also because the regulator wanted to take account of relevant court decisions.

As well as the Court of Appeal case, and the potential referral to the Supreme Court, these also include the judicial review of a FOS decision on DCAs which has been brought by Barclays Partner Finance. Judgment on this is not yet available but is expected shortly.

“This is a sensible move, and one we had been discussing with the FCA since the Appeal Court judgment. However, it is just the first step – restoring legal and regulatory certainty to this market will require an expedited path to the Supreme Court, and a stay on claims in the lower courts pending the Supreme Court’s judgment.”

“It was good two weeks ago to see the FLA intervening quickly after the verdict issuing its guidance which helped to keep the industry up and running and its now good to see they have been successful in extending the timeframe for responding to non-DCA complaints as well as DCA complaints.”

“At our conference on 26^th November we will explore where the industry goes from here. There is a chance to reflect on the wider implications of what has happened, and to discuss how the industry is likely to respond. We’re really delighted to have Stephen Haddrill, FLA director general, and Jim Higginbotham, CEO of NACFB, as speakers. And through Auto Trader we have invited dealers as well as brokers to participate in the auto and equipment sessions in order to get a complete perspective on the ruling and its effect on the various participants in our distribution chains.”

Asset Finance Connect looks forward to seeing you at this must attend event. You can find ticket information directly on the conference website or from Louise Clavey at louiseclavey@assetfinanceconnect.com