11:31 am, September 24, 2024
The ongoing motor finance scandal has taken a fresh twist today after the Financial Conduct Authority (FCA) agreed an extension of the current pause to the time motor finance firms have to respond to customer complaints.
The body has been investigating the industry’s use of now-banned ‘discretionary commission arrangements’ (DCAs) since January and is currently considering whether to implement a redress scheme.
Any such scheme would see motor finance firms that overcharged people forced to pay them damages but in the meantime, a pause has been announced to prevent ‘disorderly, inconsistent and inefficient outcomes for consumers’.
It means that firms will now have until December 4, 2025 to handle complaints relating to DCAs, while the FCA comes to a decision on how many firms may introduce a redress scheme.
In a detailed update, issued today (Sep 24), the FCA said: ‘We have extended the pause to the deadline for motor finance firms to provide a final response to customer complaints regarding discretionary commission arrangements (DCAs) until December 4, 2025.
‘On January 11, 2024, we announced a review into whether motor finance customers have been overcharged because of the past use of DCAs.
‘We also paused the eight-week deadline for a final response to relevant customer complaints.
‘We introduced the pause to prevent disorderly, inconsistent and inefficient outcomes for consumers, as well as knock-on effects on firms and the market, while we assessed the issue and determined the best way forward.
‘On July 30, 2024, we consulted on a proposal to extend the DCA complaint handling pause. This was because it had taken us longer than expected to get the data we needed from firms.
‘The extended pause allows us time, if necessary, to introduce an alternative way of dealing with DCA complaints, such as a consumer redress scheme.
‘It is too early to say if we will intervene in this way, but based on our work so far, it is more likely than when we started our review.’
The FCA investigation was initially sparked after the Financial Ombudsman Service (FOS) ruled that Barclays treated customers ‘unfairly’ in relation to DCAs.
The bank is now seeking a judicial review into the ruling, which the FCA says is ‘highly relevant’ to its work.
In its update, the body said: ‘Barclays Partner Finance has also launched a judicial review of the Financial Ombudsman Service’s decision to uphold a complaint relating to its use of a DCA.
‘The judicial review will consider legal issues highly relevant to our work. The hearing will take place in October.
‘We will set out next steps in our review into the past use of DCAs in May 2025. By then, we expect to have completed our analysis and assessed the outcome of the Barclays judicial review and other relevant cases in the Court of Appeal.’
