FCA lifeline for providers in car finance scandal: Watchdog extends deadline for companies to respond to complaints
Britain’s financial watchdog is to extend the deadline for car finance providers to respond to complaints about commission payments, in a scandal that has rocked the sector.
The Court of Appeal ruled last month that commissions paid between banks and brokers on car deals could be unlawful because they were not clearly reported to customers.
It sent shockwaves through the market because it imposed much higher transparency requirements on lenders.
Shockwave: The Court of Appeal ruled last month that commissions paid between banks and brokers on car deals could be unlawful because they were not clearly communicated to the customer
And parallels have been drawn with the scandal over the mis-selling of payment protection insurance (PPI), which ultimately cost the banks £50 billion.
Estimates of the final episode’s cost put it at £16 billion, although this is expected to rise.
Lenders including Lloyds have seen their shares tumble as concerns mount. Companies such as Close Brothers, one of Britain’s oldest investment banks, have suspended new car loans.
But yesterday the Financial Conduct Authority (FCA) said it was considering giving firms more time to assess complaints so they can be ‘handled efficiently and effectively’.
“This would help prevent disorderly, inconsistent and inefficient outcomes for consumer complainants, auto finance companies and the marketplace,” the report said in a statement.
The FCA this year launched an investigation into whether motorists have been overcharged due to ‘discretionary commission schemes’ used by the sector before they were banned in 2021.
This allowed dealers and brokers to set the interest rates on deals, encouraging brokers to charge higher rates regardless of the customer’s size, length, or credit score.
The FCA’s latest proposals, expected within two weeks, would, if implemented, give firms more time to respond to complaints.
It said: ‘Car finance companies are likely to receive a large number of complaints in response to the Court of Appeal judgment.’
The watchdog also said it would write to the High Court to ask whether the verdict could be appealed.
It added that any extension would cover at least the period until a decision by the court on whether to grant the appeal.
Close Brothers and FirstRand – both involved in the case – already plan to appeal.
If allowed, the regulator says it wants a quick decision, “given the potential impact of any judgment on the market and the consumers who rely on it.”
DIY INVESTMENT PLATFORMS
A. J. Bell
A. J. Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund trading and investment ideas
interactive investor
interactive investor
Invest for a fixed amount from € 4.99 per month
Sax
Sax
Get £200 back in trading fees
Trade 212
Trade 212
Free trading and no account fees
Affiliate links: If you purchase a product, This is Money may earn a commission. These deals have been chosen by our editors because we believe they are worth highlighting. This does not affect our editorial independence.