Insight on the Proposed Extension of the Complaint Handling Pause for Motor Finance DCAs
The FCA is proposing to extend the current pause on the 8-week deadline for firms to respond to consumer complaints about motor finance involving discretionary commission arrangements (DCAs) until at least December 4, 2025. This decision follows an ongoing review of the historical use of DCAs in the motor finance sector and recent legal developments.
The extension allows regulators more time to analyse data and review the impact of DCAs on motor finance costs. It also provides a window to evaluate the outcome of Barclays Partner Finance’s judicial review and other relevant legal proceedings.
The review initiated on January 11, 2024, is a comprehensive assessment involving extensive data from the past 14 years. However, the process has encountered delays due to difficulties in firms supplying the required data. These delays have pushed back the timeline for determining the next steps. The challenges in data management are significant, including issues with retrieving and consolidating historical data from multiple systems and stakeholders.
A crucial aspect of the review is the outcome of the Barclays judicial review, which questions the Financial Ombudsman’s decision regarding a DCA complaint. This legal challenge, along with other relevant court judgments, will play a significant role in shaping regulatory decisions and potential new measures. The results will be instrumental in determining how the review proceeds and what regulatory changes might be implemented.
The proposed extension provides time to design and consult on a potential redress scheme, should it be necessary. This scheme would offer a structured approach to address any issues identified with DCAs, ensuring that affected consumers receive fair compensation. The development and consultation of such a scheme are important steps in resolving the concerns raised by the review.
Impact on Firms:
- Firms will have an extended period before being required to issue final responses to DCA complaints. This delay is intended to prevent rushed or inconsistent resolutions and reduce disruption.
- Firms should prepare for possible new regulations or redress mechanisms that may arise from the review. They may need to adjust their complaint handling processes and compliance strategies accordingly.
Consumers will still be able to make complaints to their motor finance providers during the extended pause. Additionally, the timeline for referring complaints to the Financial Ombudsman Service will be extended, providing consumers with more time to act once the review’s conclusions are announced. This extension aims to enhance consumer protection by ensuring that they have adequate time to pursue their complaints.
The motor finance sector, which serves over 2 million consumers annually, will be closely monitored to ensure it remains fair and competitive. The extended pause is designed to balance a thorough regulatory review with the need to maintain market stability and protect consumer interests. This approach helps ensure that any changes or redress mechanisms are well-considered and beneficial for both consumers and firms.
Impact Summary:
- For Firms: The extended pause provides additional time to manage complaint responses and adapt to potential regulatory changes. Firms should stay informed about developments and prepare for possible new requirements or redress processes.
- For Consumers: The extension of the referral period to the Financial Ombudsman Service ensures that consumers have ample time to address their complaints once the review concludes, enhancing consumer protection.
- For the Market: The extension reflects a commitment to thorough and fair regulatory practices, aiming to ensure that any changes or redress schemes are well-considered and beneficial to both consumers and firms.
In conclusion, the proposed extension is a strategic move to ensure comprehensive analysis and fair treatment of motor finance complaints related to DCAs, addressing both regulatory and market considerations effectively. For the detailed FCA article we encourage you to read here.
Managing complaints effectively is essential for growth. To find out how Momenta can assist you with improving your strategies, cutting risks, and boosting your business success, get in touch with our experts Stephen Higgs and Harry Lee to learn how Momenta can help you turn complaints into opportunities.
