Financial Conduct Authority decides to take action on certain motor finance commission complaints

🚨 So yesterday was an interesting (and busy) day for motor finance lenders and dealers. Firstly, the FCA decided to intervene into motor finance commission complaints. Secondly, two Ombudsman decisions were published on discretionary commission arrangements entered into before 28 January 2021.

🗞️ So what happened?

✍️ The FCA published a webpage about motor finance commission complaints and a press release too.

✋The FCA has paused the 8 week deadline for responding to motor finance complaints where (a) there was a discretionary commission model in place for an agreement before 28 January 2021 and (b) the complaint was made on or after 17 November. This pause lasts until 25 September 2024.

🤔 The lack of any consultation means there are many unanswered questions. For example, what happens to letters of claim? Is there any impact on litigation cases? And what steps should firms take to investigate paused complaints (the Ombudsman has already been in touch on that!).

🕵️ The FCA is using its powers under Section 166. This means some firms will have a skilled person looking into their practices. We know from our clients that meetings are already being booked in today and on Monday.

🪧 But what has the Ombudsman done?

The Financial Ombudsman Service has issued two detailed decisions from an Ombudsman upholding complaints (and one which was not upheld). They both conclude that discretionary commission models are unfair and the customer should effectively only pay the interest at the rate at which the dealer would receive no commission.

There’s much to say on this but some initial points:

(a) It hard to reconcile that guidance and a principle meant that firms should have done significantly more than CONC 4.5.3R required (either before or after the changes in 2021

(b) The approach bears very little resemblance to our experience of dealing with hundreds of similar claims before the Court.

(c) The proposal on redress takes no account of the complexity and reality of a customer’s decision to get a car on finance.

📋 So, what next?

Given it’s fashionable to do three point slogans then mine is: reflect on the developments, prepare for next steps (including, probably, more customer communications) and clearly decide and implement your strategy.

Financial Ombudsman Service publishes latest edition of ‘Ombudsman News’

On 28 October 2020, the Financial Ombudsman Service (the Ombudsman Service) published its latest edition of ‘Ombudsman News’.

This edition includes:

– a blog setting out how it is ‘helping small businesses with life-changing financial disputes’;

– a blog on the impact of COVID-19 on financial services complaints and SMEs; and

– the Ombudsman Service’s half-yearly complaints data (including a slight increase on the number of non-PPI complaints received in the last reporting period).

Financial Ombudsman Service publishes latest edition of ‘Ombudsman News’

On 5 June 2020, the Financial Ombudsman Service (the Ombudsman Service) published its latest edition of ‘Ombudsman News’.

The Ombudsman Service sets out things it will consider when looking at:

– claims by customers under Section 75(1) of the Consumer Credit Act 1974;

– complaints by customers in financial difficulties;

– complaints about motor finance agreements (including expecting businesses to “listen and proactively look for signs of financial difficulties“, expecting firms to be “even more flexible in their forbearance measures” and expecting firms to “fully inform consumers of their options to exit the agreement where necessary/appropriate“); and

– complaints about mortgages.