PS24/18: Further temporary changes to handling rules for motor finance complaints

Read PS24/18 (PDF)[1]

Why we are changing

In January 2024, we introduced rules for handling motor finance complaints[2] where there was a discretionary commission arrangement (DCA) between the lender and the broker of the loan. The rules extend the time motor finance firms have to respond to motor finance DCA commission complaints until after 4 December 2025. 

In October 2024, the Court of Appeal ruled that it was against the law for brokers to receive a commission of any kind from lenders providing motor finance, without the customer’s informed consent. We anticipate an increase in complaints to motor finance firms about commission arrangements following the Court of Appeal’s judgment. Our new rules extend the time motor finance firms have to respond to complaints about motor finance agreements where there was a commission arrangement other than a DCA. This will help prevent disorderly, inconsistent and inefficient outcomes for consumers and firms. 

What we are changing

We are introducing temporary rules for handling motor finance non-DCA commission complaints. The changes broadly mirror the existing rules for motor finance DCA commission complaints. They:

• Extend the time firms have to provide a final response to such complaints until after 4 December 2025.
• Give consumers more time to refer their complaint to the Financial Ombudsman Service, following the receipt of a final response. 

Who this is for

The rules in this policy statement are directly relevant to:

• Consumers who have taken out motor finance agreements involving commission arrangements.
• Motor finance providers.
• Motor finance brokers, including motor dealers.
• Professional representatives bringing complaints about commission to motor finance providers and credit brokers, including claims management companies (CMCs) regulated by the FCA and other professional representatives.
• This policy statement will also interest consumer organisations and trade bodies representing the motor finance and professional representative sectors.

Next steps

The rules described in this policy statement will come into force on 20 December 2024. The rules mean firms do not have to provide final responses to motor finance non-DCA commission complaints received on or after 26 October 2024 until after 4 December 2025. 

Firms must still progress motor finance non-DCA commission complaints in line with the DISP rules. This includes continuing to investigate and collect evidence to help with the eventual resolution of these complaints, taking into account all relevant factors (including the Court of Appeal’s judgment). 

Background

We consulted on these rules[3] following the Court of Appeal’s judgment. The judgment, which has since been appealed to the Supreme Court[4], is a significant development in the case law on motor finance commission. It is relevant to both DCAs and non-discretionary commission arrangements, such as fixed or flat fee commission arrangements.

In the consultation paper, we set out our analysis that the judgment is likely to result in a sharp and significant increase in motor finance non-DCA commission complaints. This will create additional pressures on firms and the Financial Ombudsman. The new rules are intended to help ensure that complaints are resolved in an orderly, consistent and efficient way.