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What has happened?

What are the key points the FCA has commented on?

The FCA is currently reviewing the historical use of motor finance discretionary commission arrangements (DCA). It has observed firms taking different approaches to account for the potential impact of their previous use of DCA on their financial resources.

It is therefore writing to firms to remind them they must maintain adequate financial resources at all times. While each firm will need to examine its specific circumstances, the FCA expects that this would include planning for any additional operational costs from increased complaints and, where applicable, to meet the costs of resolving those complaints.

As this review continues, firms are also being asked to: 

• Continue to investigate the complaints they receive involving a DCA. This will help to ensure that firms can act promptly to resolve complaints if the FCA decides that the pause should be lifted and that complaint handling should resume. Even if the FCA decides that DCA complaints should be resolved through an alternative approach, firms will likely need to take similar steps.
• Consider the Information Commissioner’s Office guidance on responding appropriately to data subject access requests1. Firms are asked to confirm if a consumer asks, whether their agreement involved a DCA, even if they have not submitted a data subject access request. 
  
  See: ICO Publication 
  
  
• Notify the FCA if they are involved in litigation relating to motor finance commissions that are subject to, or likely to be subject to, appeal to the High Court or the Court of Appeal.
  
  The FCA has reported that firms involved in its review have engaged constructively. However, many firms are struggling to promptly provide the data needed. Reasons for this include data being stored on multiple systems and/or being spread between lenders and brokers. In some older cases, firms have not retained all relevant records.
  
  On 3 April 2024, Barclays commenced judicial review proceedings of the Financial Ombudsman Service’s decision to uphold a complaint relating to DCAs, and the FCA recognises that this work has generated some uncertainty. Providing certainty to consumers and firms as soon as possible relies on receiving comprehensive data promptly from a range of firms, and potentially, on the speed and outcome of any litigation.
  
  The FCA has undertaken to set out the next steps by 24 September 2024 at the latest, and,  if necessary, will extend its review and the complaint pause currently in place.

How can we help you?

Thistle Initiatives has supported lending firms for over 10 years as a trusted compliance and regulatory adviser. In addition to assisting you as-and-when, our team of specialists can serve as your right hand in meeting and complying with FCA regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your motor finance commission arrangements, or more general regulatory questions? If so, we can help in any of the following ways;

• Reviewing your financial resources position,
• Reviewing your complaints handling processes in relation to past motor finance commission payments,
• Advising on dealing with Financial Ombudsman Service cases, and
• Advising firms involved in the FCA’s review of historic motor finance commission arrangements and sales.

Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.

See also Thistle’s previous blog posts on this subject here and here.