The Financial Conduct Authority (FCA) has declared its intention to extend its investigation into the motor finance market today, amidst ongoing disputes between thousands of consumers and providers over commission arrangements.
The FCA announced that it plans to outline the next steps in its review into the historical use of so-called DCAs in May 2025, as opposed to the initial deadline of September 2024. It also stated that it would extend the current eight-week deadline for firms to respond to complaints.
“Firms involved in our review have engaged with us constructively, but many have struggled to supply the data we need within the requested time,” the UK finance watchdog said in a statement. Challenges include firms not retaining older data, and data being stored on multiple systems or being spread between lenders and brokers.
Barclays Partner Finance has also initiated a judicial review into the Financial Ombudsman Services’s decision to uphold a complaint relating to its use of DCA, which will consider legal issues “highly relevant” to the FCA’s review. A decision is anticipated in autumn, while other relevant judgements are also expected in cases heard by the Court of Appeal.
“We are therefore proposing to extend the current pause to the 8-week deadline for firms to respond to motor finance complaints involving a DCA. Under our proposals, firms will not have to issue a final response to DCA complaints until after 4 December 2025 at the earliest.”
In January, the Financial Conduct Authority (FCA) announced a review of historical motor finance commission arrangements from 2007 to 2021, aiming to ensure consumers receive appropriate settlements in case of misconduct. This announcement led to billions being wiped off the value of some banks due to investor concerns over potential compensation costs, as reported by City AM.
Dealer Commission Arrangements (DCA), agreements between lenders and car dealers or brokers that allowed the latter to set interest rates on car repayment plans within a lender-determined range, were banned by the regulator in January 2021. The FCA found these arrangements had cost customers £300m more annually than the current flat-fee model.
While it’s still early days, there are indications that the FCA may introduce an alternative method for handling DCA complaints. Proposed interventions include a consumer redress scheme.
The FCA, according to its statement, is also considering extending the deadline for consumers to refer a complaint to the Financial Ombudsman until after 29 July 2026, or 15 months from the date of their final response letter from the firm, as opposed to the standard six-month period.