Watchdog mulling complaint extension in wake of shock court ruling

The UK financial watchdog plans to consult on extending the time finance firms have to respond to consumer complaints involving non-discretionary commissions and granting consumers more time to escalate these complaints to the Financial Ombudsman Service.

“We’re acting swiftly to address concerns raised by the Court of Appeal’s recent ruling,” the Financial Conduct Authority (FCA) announced this week.

Expected to publish proposals within two weeks, the FCA is aiming for a mid-December implementation of this extension, should it be adopted.

The FCA’s move follows the shock Court of Appeal decision on October 25, where it ruled it is unlawful for car dealers (acting as brokers) to receive commissions from lenders without fully informing customers.

The judgment highlighted a critical consumer right: customers must be informed of all material commission details, including the amount and calculation method, before agreeing to financing. The ruling applies to both fixed commission and the now-banned discretionary commission arrangements (DCA), which the FCA prohibited in 2021.

Since the ruling in Hopcraft v. Close Brothers Ltd, Johnson v. Firstrand Bank Ltd, and Wrench v. Firstrand Bank Ltd, the FCA said it had  been actively engaging with the industry.

“We’re committed to ensuring an orderly and effective approach to handling these complaints,” the regulator stated. This process has involved consultations with 63 motor finance firms, as well as discussions with industry leaders, consumer representatives, and government bodies.

The FCA said it anticipated a surge of consumer complaints related to the judgment and aims to ensure these are handled efficiently.

The proposed complaint extension would give firms the necessary time to respond appropriately, thus preventing inconsistent or inefficient resolutions for both consumers and the industry.

The FCA’s proposed extension would remain effective at least until the Supreme Court determines whether it will grant permission to appeal the Court of Appeal’s decision.

The FCA intends to ask the Supreme Court for an expedited decision on the matter, acknowledging the severe market and consumer implications of any final judgment. If the appeal is allowed, the FCA said it may intervene to provide expertise to assist the court’s assessment.

The FCA’s existing review of historical DCAs, launched in January, seeks to assess potential consumer harm from pre-2021 DCA practices. Following data-collection delays, the FCA extended the timeframe for complaints until December 2025, considering factors like recent judgments and the outcome of a judicial review requested by Barclays Partner Finance, which may further impact the review’s timeline and scope.

Meanwhile, finance firms are advised to prepare for the expected complaint volume by allocating sufficient resources to meet their obligations under any new timelines. The FCA further advised firms to consider making financial provisions in case compensation becomes warranted.

“Consumers who believe they’ve been affected by commission practices should continue to submit their complaints as usual,” an FCA spokesperson confirmed.

Stephen Haddrill, director general of the Finance and Leasing Association, commenting on the FCA’s decision to consult on extending the response time on non-discretionary commission consumer complaints, said: “This is a sensible move, and one we had been discussing with the FCA since the Appeal Court judgment.

“However, it is just the first step – restoring legal and regulatory certainty to this market will require an expedited path to the Supreme Court, and a stay on claims in the lower courts pending the Supreme Court’s judgment.”