The deadline for complaints about car financing has been extended following a ruling by the Court of Appeal

Car finance companies could be given more time to respond to customer complaints about non-discretionary commission schemes following a landmark court ruling.

The Financial Conduct Authority (FCA) has investigated the historical use of DCAs, a now banned form of car finance that allowed banks to set the interest rate on a car buyer’s finance deal.

It has already extended the break on the deadline for lenders to provide their final response to complaints related to DCAs until December 4 next year.

However, following a recent judgment by the Court of Appeal, it is considering applying the same deadline for responses to complaints about non-DCA agreements.

In a landmark ruling last month, the court said it is illegal for car sellers to receive a commission from a lender on finance deals if the car buyer has not given ‘fully informed consent’ to the payment.

As a result, the FCA warned that car finance companies were likely to receive a huge volume of complaints.

It said extending the time to respond to non-DCA complaints would allow lenders to handle complaints “efficiently and effectively” and “help avoid disorderly, inconsistent and inefficient outcomes.”

Nikhil Rathi, chief executive of the FCA, said: ‘The Court of Appeal’s ruling means that many customers who bought a car with financing through a dealer could be owed compensation.

“We want to ensure that consumers who owe money get it in an orderly manner, and that the auto finance market continues to provide competitive deals to the millions of people who depend on it.”

The FCA is considering two options for a deadline: May 31, 2025, which corresponds to the time the Supreme Court could take to allow the October ruling to be appealed, and December 4, 2025.

Analysts believe that the total compensation paid by UK car finance providers due to car finance commissions could resemble the PPI scandal, which has cost banks £50 billion.

Credit rating agency Moody’s predicts that lenders could pay up to £30 billion, with smaller and more specialized firms such as Close Brothers and Aldemore taking a bigger hit to their profits due to the huge damages involved.

In a trading update on Thursday, Close Brothers warned of a possible “financial impact of measures taken in response to the court’s judgment”, including higher operating costs and professional and legal fees.

It came as the company revealed its loan book rose 0.6 percent to £10.2 billion in the three months ended October, thanks to the growth of its commercial divisions.

Mike Morgan, group finance director, said: ‘We are confident in our underlying businesses, supported by our strong balance sheet and liquidity position, and remain committed to driving them forward.’

Close Brothers Group Shares were 0.8 per cent higher at 216.8p this morning, but the fallout from the FCA investigation has seen them fall by around 73 per cent this year.