The Financial Conduct Authority (FCA) completed its motor finance review in March 2019. Now, nearly five years later, the FCA is going to investigate how complaints for motor finance commissions are being dealt with!
We have provided our members with updates on this matter since May 2021, and we have been aware of numerous Financial Ombudsman Service (FOS) complaints sent over from our members. These complaints have been ongoing for months and the FOS has only provided one adjudication, which they found in our member’s favour (Note: the adjudication was two pages!) However, they appear to have provided two adjudications for the FCA that support the FCA’s point of view.
The good news currently is the FCA is focussing its attention on the lender and not our members. Headlines in the media confirm as much: “Lenders could face £10bn compensation bill over car financing.” That said, if the lenders lose billions, they will look to recoup in other ways in the future.
The FCA banned discretionary commission models in January 2021 and made amendments to their rules and guidance. This was on the back of its thorough review (“Our findings need to be taken in context: the sample size was small and biased towards independent retailers offering PCP or other forms of hire-purchase.”). The FCA reviewed only 1000 finance agreements as part of its review. To add a bit of context, approximately two million motor finance agreements were written in 2022.However, this resulted in the following headline: “Millions of people in the UK may have been mis-sold car finance.”
The FOS has reported over 10,000 complaints and has now decided to review these complaints. From our experience, the reason for this influx of complaints is down to the “no win, no fee” solicitors and claims management companies who, from the outset, jumped onto this perceived “gravy train” as mentioned in our legal update in February 2022: FCA adds to “no win, no fee” compensation culture
One of the interesting facts to come from the FOS’s 64-page and 70-page adjudications, and included in the FCA’s press release, was the Ombudsman’s comment on the Finance and Leasing Association’s reporting that the county courts have dismissed 55 of the 86 motor finance commission claims that have been tried to August 2023. The Ombudsman’s conclusion stated: “I don’t think that this is necessarily indicative, and certainly not determinative, of the approach that a court would be likely to take in this case given the facts I’ve set out.” A bold statement to make as these county court claims would not have been dissimilar to the complaints received by the FOS.
Whilst we await the FCA’s outcome of its review, which it has stated will take at least six months, please continue to send us any finance commission letters. We will continue to review the situation and keep you updated on any developments.
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