The Financial Conduct Authority (FCA), the UK’s financial watchdog, has extended the deadline for lenders to respond to customer complaints regarding hidden commission payments in motor finance deals. This extension, now set for December 4, 2025, follows an October ruling by the London Court of Appeal that declared it unlawful for car dealers to receive commission from lenders without the customer’s informed consent. The FCA anticipates a significant influx of complaints due to this ruling and has granted the extension to ensure a more organized and consistent process for both consumers and firms. This extension applies to complaints related to non-discretionary commission payments, mirroring a previous extension provided for complaints involving discretionary commission agreements.
This situation stems from a complex issue within the motor finance industry, where dealers have historically received commissions from lenders for facilitating finance agreements. The recent court ruling has highlighted the lack of transparency in these arrangements, particularly regarding the customer’s awareness and consent to these commissions. This has opened the door for consumers who believe they were unfairly charged due to hidden commissions to seek redress. The potential financial implications for lenders are substantial, with billions of pounds in compensation potentially at stake. Close Brothers, a major banking group, has been granted permission to appeal the Court of Appeal’s ruling to the Supreme Court, signifying the ongoing legal battle surrounding this issue.
The FCA’s extended deadline provides more time for lenders to handle the expected surge in complaints. The regulator aims to prevent a chaotic and inefficient process that could negatively impact both consumers and the industry. The FCA has emphasized its commitment to ensuring that affected consumers receive appropriate compensation and that the motor finance market continues to function effectively and competitively. Importantly, the deadline extension also encompasses motor leasing agreements, even though they weren’t specifically addressed in the Court of Appeal’s judgment, along with standard motor finance credit arrangements.
Concurrent with the commission issue, the FCA is also conducting a separate investigation into discretionary commission arrangements, a practice where dealers manipulated interest rates to increase their commission, effectively overcharging consumers without their knowledge. This practice was banned in 2021. The FCA plans to reveal its next steps in this review, along with an update on non-discretionary commission complaints, in May 2024. The timing and nature of these announcements will be influenced by the progress of the Supreme Court appeal. The FCA has committed to ending the complaint handling extension earlier than December 2025 if the legal situation allows.
Consumers who believe they may have been impacted by these hidden commission practices are encouraged to file a complaint with their finance provider. Resources such as the consumer finance website MoneySavingExpert.com offer template letters to assist with this process. Consumers can also complain directly to their finance provider without using a template. It’s crucial to lodge a complaint even if a previous claim was rejected. The complaint should specifically inquire about potential overcharges due to broker commission and request rectification if this occurred. If the company’s response is unsatisfactory, consumers can escalate the complaint to the Financial Ombudsman Service (FOS) free of charge. The deadline for complaints is July 29, 2026, or 15 months from the company’s final response, whichever is later.
The FCA’s investigations and the ongoing legal challenges underscore the importance of transparency and consumer protection within the motor finance industry. The potential for widespread misconduct related to commission arrangements has prompted regulatory scrutiny and legal action, aiming to ensure fair practices and appropriate compensation for affected consumers. The FCA’s ongoing review and the Supreme Court appeal will likely shape the future landscape of motor finance and its regulation in the UK. Consumers are advised to stay informed about these developments and exercise their right to complain if they believe they have been unfairly treated. The FCA’s ultimate goal is to maintain a healthy and competitive motor finance market while safeguarding consumer interests.
