FCA introduces temporary complaint-handling rules for car finance commission complaints

The Financial Conduct Authority introduced temporary complaint-handling rules for certain car finance complaints on 11 January 2024, covering complaints where a discretionary commission arrangement (DCA) was in place¹. The rules came into force on that date under the Dispute Resolution: Complaints Sourcebook (Motor Finance Discretionary Commission Arrangement Complaints) Instrument 2024, made by order of the FCA board on 10 January 2024¹.

Under the rules, time is treated as not running for the eight-week period firms normally have to give a final response, for a period of thirty-seven weeks beginning 11 January 2024 and ending 25 September 2024¹. Where a final response is sent between 12 July 2023 and 20 November 2024, the six-month period consumers have to refer a complaint to the Financial Ombudsman Service is extended to fifteen months¹. The three-year complaints record rule is also treated as not running for the same period¹.

A "relevant motor finance DCA complaint" is defined as a complaint relating in whole or part to a regulated credit agreement entered into before 28 January 2021, where the agreement financed the purchase of a motor vehicle, arrangements between the lender and a credit broker included a discretionary commission arrangement, and the firm received the complaint between 17 November 2023 and 25 September 2024 or sent a final response between 12 July 2023 and 20 November 2024¹. The definition also covers arrangements that would have constituted a DCA if entered into on or after 28 January 2021¹. Lenders and credit brokers must retain and preserve records relating to regulated credit agreements entered into before 28 January 2021, including the agreement, commission arrangements, commission paid, customer files and communications, for the period from 11 January 2024 to 10 January 2025¹.

The Financial Ombudsman Service said the FCA "has recently announced it will be assessing the car finance market to make sure that if consumers suffered a loss due to poor practices, they are compensated fairly"³.

The FCA banned DCAs in January 2021⁴. Other commission arrangements include fixed rate commission, usually a percentage of what is borrowed, and flat fees paid for each agreement processed or arranged⁴.

Why it matters for households

The pause applies to complaints about car finance commission where a DCA was in place on agreements entered into before 28 January 2021. Firms do not have to give a final response during the paused period, and consumers have longer, fifteen months rather than six, to take a complaint to the Financial Ombudsman after a final response¹. The Ombudsman's annual data, published 12 June 2024, recorded 21,441 new hire purchase (motor) complaints in 2023/24 against 11,446 the year before, with motor finance commission complaints accounting for most of these cases and professional representatives submitting around 90% of them⁵. The Ombudsman upheld 37% of complaints it resolved across all products in 2023/24, up from 35% in 2022/23⁵.

What happens next

The FCA's temporary rules ran to 25 September 2024 for the pause on the eight-week deadline, with the extended referral period applying to final responses sent up to 20 November 2024¹. The Ombudsman's Plans and Budget consultation for 2024/25 closed on 30 January 2024³. Later developments, including a Court of Appeal ruling on 25 October 2024 and a High Court judgment on 17 December 2024, are recorded by the Ombudsman⁴.