FCA to undertake work in the motor finance market

The FCA has published a web page setting out its intentions to intervene again in the motor finance market and has published a Policy Statement regarding temporary changes to handling rules for motor finance complaints.

In 2021, the FCA banned discretionary commission arrangements in motor finance provisions, thus removing the incentive for brokers to increase the interest rate that a customer pays for their motor finance. Firms, however, are rejecting most complaints because they consider that they have not acted unfairly nor caused their customers loss based on the applicable legal and regulatory requirements.

The Financial Ombudsman Service (FOS) has considered some complaints rejected by firms, and found in favour of complainants in two recent decisions (see here and here). This is likely to prompt a significant increase in complaints from consumers to firms and the Financial Ombudsman. The FCA has also published a consumer-facing car finance complaints factsheet.

The FCA will now be taking action under s166 of the Financial Services and Markets Act 2000, to review historical motor finance commission arrangements and sales across several firms. If the FCA finds there has been widespread misconduct and that consumers have lost out, the FCA will identify how best to make sure people who are owed compensation receive an appropriate settlement in an orderly, consistent, and efficient way and, if necessary, resolve any contested legal issues of general importance.

From 11th January 2024, the FCA has introduced the pause without consultation to prevent disorderly, inconsistent and inefficient outcomes for consumers as well as any knock-on effects on firms and the market. The regulator aims to communicate their next steps on this issue by 24 September 2024 at the latest.

In a possible link to how the FCA will approach its current disquiet about premium finance and its cost, insurance intermediaries adding premium finance overrides to premium finance arrangements should perhaps take note of the progress of this issue.

About the author

A compliance technical expert, Al is UKGI's Senior Technical Resources Consultant providing 'back-room' technical support which includes everything from assisting Consultant colleagues with challenging or unusual queries, to updating UKGI's compliance manual, to writing and delivering training, workshops and webinars.

Al Haughton UKGI

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