Complaints About Discretionary Commission in Motor Finance
The Financial Conduct Authority (FCA) has announced a review of discretionary commission arrangements in the motor finance industry, due to the number of complaints and court claims in this area and to ensure good customer outcomes.
You can see more information on the FCA’s website at https://www.fca.org.uk/news/statements/fca-undertake-work-motor-finance-market.
What has changed?
On 11th January 2024, the FCA paused the 8-week deadline for motor finance firms to provide a final response to relevant customer complaints.
The pause only applies to complaints about motor finance agreements where there was a discretionary commission arrangement between the motor finance lender and the credit broker (‘Relevant Complaints’). It will last for 37 weeks (approximately 9 months). The 37-week period will enable the FCA to analyse the issue and decide next steps. The FCA has also amended the deadline for referring Relevant Complaints to the Financial Ombudsman Service (FOS). Customers will have 15 months, rather than the usual 6 months, to refer Relevant Complaints to FOS, where they receive a final response up to and including 20 November 2024.
What are we doing?
We will apply the pause to new Relevant Complaints which we receive, up to and including 25 September 2024.
This means that if a customer submits a Relevant Complaint to us, we have 8 weeks, beginning on 26 September 2024, to provide them with our final response.
If we cannot provide our final response within this timeframe, we will tell the customer when we expect to respond and inform them of their right to refer the complaint to the Financial Ombudsman Service (FOS).
Customers are still able to submit complaints to us, whether this is about commission or any other matter. We will send customers an acknowledgment and confirmation of the timescales that apply.
Save as set out above, our complaints procedures will continue to apply as published on our websites. We have updated our websites and communications to ensure our customers are aware of these changes.
The pause will not apply to complaints about motor finance arrangements where there was a fixed/non-discretionary commission arrangement between the motor finance lender and the credit broker. We will continue to deal with these and other complaint types within the usual timescales set out in our procedures.
What are we asking you to do?
Your responsibilities in respect of complaints handling, as set out in our Procedure Guide, have not changed in respect of complaints that you would ordinarily refer to us.
You should continue to refer complaints to us, where we are responsible for resolving them, in the usual manner. We will inform the customer of any changes to timescales where relevant.
For complaints which you are responsible for resolving, you should apply the changes announced by the FCA immediately where relevant. You should seek independent compliance support if you are unsure how to implement the changes.
You should ensure your customers are made aware of the changes on the FCA website at https://www.fca.org.uk/carfinance.
We take this opportunity to remind you of your obligations under our Motor Dealer/Motor Broker Agreements and continue to expect you to work with us proactively to resolve all complaints raised by a customer or their representative and to notify us immediately if you receive any complaint which may give rise to a claim against us.
Important: Retention of Records
The FCA has also introduced a rule requiring lenders and credit brokers to maintain and preserve any records that are or could be relevant to the handling of existing or future complaints or civil claims relating to agreements with discretionary commission arrangements entered into before 28 January 2021.
This is regardless of whether the customer has complained or not. This requirement applies until 11 January 2025, 1 year from when the new rules came into force.
You must ensure that you do not delete any relevant information, in contravention of this rule, that may be of use to you or Secure Trust Bank in handling Relevant Complaints or claims.
What will happen next, and what if you have additional questions?
We will issue further communications as and when the FCA provides further details on its planned work or updates its guidance to firms.
We suggest you follow FCA press releases directly to ensure you are aware of updates.
At this point, your Account Manager cannot share any information beyond that contained within this communication. We actively seek feedback about our communications and are happy to receive any suggestions for improvements.