The Financial Conduct Authority (FCA) is urging the Supreme Court to swiftly decide whether to hear an appeal concerning a recent ruling on car finance mis-selling. This appeal follows a Court of Appeal decision deeming it unlawful for car dealers to receive commissions from lenders without the customer’s informed consent.
Last month, the Court of Appeal’s ruling sent ripples through the car finance industry. It declared that car dealers, acting as brokers, must not receive any form of commission from lenders without full disclosure to the customer. This judgement applied to both discretionary and fixed commission arrangements. The FCA has responded to this decision by broadening its regulatory focus to include both types of commissions, which could lead to an influx of claims from consumers.
In light of this ruling, the FCA plans to consult on extending the timeframe for motor finance firms to address consumer complaints related to non-discretionary commissions. This extension would also apply to consumer referrals to the Financial Ombudsman Service, aligning with current practices for discretionary commission arrangements. Such extensions are intended to help manage what is anticipated to be a significant volume of complaints, ensuring that responses are consistent and equitable.
The FCA has been actively engaging with the industry following the court’s decision. It has participated in discussions alongside government representatives and has convened its own industry roundtable. Conversations with 63 different firms and consumer representatives have taken place to understand the potential impact of the ruling.
The FCA has formally requested the Supreme Court to expedite its decision on whether to allow an appeal. Should the appeal proceed, the FCA intends to intervene, given the substantial implications the judgement could have on the market and consumers relying on it. An extension would provide motor finance firms the necessary time to prepare resources for final complaint responses.
Moreover, companies may need to consider making financial allowances to address complaints in compliance with legal requirements. Consumers who suspect they have grounds for a complaint regarding commission arrangements are encouraged to continue raising these issues in the usual manner.
The FCA’s review of historical discretionary commission arrangements, which spans multiple firms, is also under reconsideration in light of the Court of Appeal’s judgement. This review was initially launched in January and aims to reassess its timeline and scope depending on the Supreme Court’s decision.
Cheshire law firm Bott & Co, representing a successful claimant, hailed the ruling as a significant advancement for consumers. Solicitor Coby Benson praised both the FCA and the judiciary for tackling longstanding transparency deficiencies in the car finance sector. He noted the extension of complaint timeframes and broadened eligibility criteria for claims as essential steps allowing more consumers to pursue rightful compensation. Benson cited winning more than 90% of litigated mis-sold car finance cases since 2022, with average compensation of £1,600 per case.
In concurrence, Alex Neill from Consumer Voice views the announcement as potentially transformative for consumers, suggesting it could lead to considerable financial redress for many. She advises consumers previously assured of no discretionary commission to now inquire if any commission was involved, given the possibility of owed compensation.
The FCA’s proactive measures are poised to significantly influence consumer rights within the car finance industry. By advocating for transparency and extending complaint timeframes, the regulator seeks to fortify consumer protection and ensure fair market practices.
