We welcome the additional clarity the judgment brings to discretionary commission arrangement (DCA) complaints.
On 17 December 2024, the High Court found in favour of the Financial Ombudsman Service[1], in a review of its decision to uphold a complaint relating to a discretionary commission arrangement (DCA) in a motor finance agreement. The Court dismissed all 3 grounds of appeal brought by the lender, Barclays Partner Finance.
The Judge found that the Financial Ombudsman had interpreted our rules and the Consumer Credit Act 1974 correctly when deciding that the lender and car dealer involved in this case did not meet the relevant standards in place at the time. The Financial Ombudsman was entitled to find that the dealer and the lender did not adequately disclose their commission arrangements to the borrower and that the relationship between the lender and the borrower was unfair in those circumstances.
We welcome the additional clarity this judgment brings to consumer complaints involving DCAs. We are currently reviewing the use of DCAs in the motor finance market[2] before our 2021 ban. Our review seeks to understand if there was widespread misconduct related to DCAs, if consumers have lost out and, if so, the best way to make sure any compensation owed is received in an appropriate settlement in an orderly, consistent and efficient way. We gave firms more time to provide final responses to complaints about motor finance where a DCA was involved while we carried out our review.
The Supreme Court recently confirmed[3] it will hear an appeal against the Court of Appeal's judgment in 3 other motor finance cases involving DCAs and non-DCAs. The appeal relates to the application of common law, equitable principles and the Consumer Credit Act, rather than our rules.
Firms who provide motor finance are likely to receive a high volume of complaints following the Court of Appeal judgment. We have proposed extending the time firms have to respond to motor finance complaints[4] where a non-DCA was involved. This would help avoid disorderly, inconsistent and inefficient outcomes for consumers and firms. We will publish our policy statement confirming the outcome of our consultation by 19 December 2024.
Both the High Court judgment and the Supreme Court hearing deal with important questions of law highly relevant to our review. We plan to set out next steps in our DCA review in May 2025. We hope to also provide an update on motor finance non-DCA commission complaints at the same time. However, given the Court of Appeal’s judgment affects both types of complaint, what we can say in May will depend on the progress of the appeal to the Supreme Court and the timing and nature of any decision.