The Financial Conduct Authority (FCA) has announced its intent to extend the pause on the eight-week deadline for motor finance firms to handle complaints, now expanding it to include cases involving non-discretionary commission arrangements. This follows a similar pause applied to complaints regarding discretionary commission arrangements (DCAs).
While the initial pause aimed to prevent disorderly outcomes during the FCA’s review of DCAs, the proposed extension underscores the regulator’s recognition of the need to address all commission structures. This approach, however, has faced criticism for its slow pace and reliance on consultation processes, despite the urgency of consumer grievances.
A Welcome Step, But Is It Enough?
Jamie Patton, Managing Director at Johnson Law Group, acknowledged the progress represented by this proposal but expressed frustration with the FCA’s reliance on consultation:
“I think this should be viewed as positive news that the FCA is finally aligning its stance with the prevailing law and looking to include all vehicle finance commissions into its ‘pause.’
I question why it is doing this via consultation (and thus causing further delay) when the first pause applied to Discretionary Commission Arrangements was done without any consultation. They should just get on and do it.”
Patton further emphasized the pressing need for the FCA to conclude its review and prepare for swift action following key legal developments, such as the Supreme Court’s decision on the Johnson Appeal:
“They should similarly get on and conclude their review into this sector with a view to launching a scheme. Consumers have been waiting long enough!”
FCA’s Justification
The FCA has defended its cautious approach, citing the complexity of historical data and the ongoing legal landscape. The proposed extension until December 2025 is intended to allow the FCA to comprehensively review both discretionary and non-discretionary commission arrangements and assess potential consumer harm. Critics, however, argue that the delay risks leaving consumers without resolution for an unacceptable period.
Industry Impact and Consumer Advocacy
Claimant law firms have played a key role in representing affected consumers, highlighting the harm caused by opaque commission practices. For these firms, the FCA’s proposal is a double-edged sword: it signifies recognition of the broader issues but also underscores the need for immediate action to address harm. They argue that continued delays will only benefit firms accused of misconduct, allowing them to sidestep accountability while consumers remain in limbo.
For further details, see the FCA’s full announcement:
www.fca.org.uk/publication/transcripts/call-with-market-analysts-motor-finance-november-2024.pdf).