The road lengthens for vehicle finance complaints - FCA consults on extending timeframes further

The FCA has published a consultation paper inviting discussion on a further extension to complaints handling rules for motor finance complaints. This comes as a result of the FCA admitting that it will not be able to set out the next steps they intend to take in this area by the anticipated deadline of 24 September 2024.

Regular readers will be aware that vehicle finance complaints have been a hot topic for the FCA in 2024. In January 2024, they announced that firms would have 45 weeks (rather than the usual 8) in which to issue a final response in respect of complaints concerning discretionary commission arrangements ("DCAs"), as well as a period of 15 months (rather than 6) in which to refer their complaint to FOS (you can read all about these changes here). 

Since then, the FCA has been completing a review of the use of DCAs (using s.166 of FSMA on some occasions) and generally gathering data. Also, Barclays has sought to judicially review a FOS final decision upholding a DCA complaint and a number of civil cases were heard by the Court of Appeal in July 2024 – the outcomes of both are eagerly awaited, as they will impact both on FOS' handling of complaints and the legal liability issues associated with these claims.

As a consequence, the FCA does not believe it will be in a position to complete their diagnostic work by 24 September 2024 as they had hoped and has published a Consultation Paper setting out a proposed extension to the pause on handling complaints. The FCA now anticipate that they will set out their proposed next steps in full in May 2025, with the strong indication from the paper being that a full redress scheme is being considered. 

The proposal is to extend the pause until 4 December 2025 at the latest - this will apply to all complaints received between 17 November 2023 and 4 December 2025 – firms will not be obliged to issue final responses on complaints received during this period until the 4 December 2025 deadline at the earliest (although the FCA does note that they may consult on ending this sooner if they decide not to introduce an alternative way of dealing with these complaints). Under the proposals, complainants will have until the latter of 29 January 2026 or 15 months from the date of a final response letter in which to refer their complaint to FOS.

It is perhaps a positive that the FCA seems to be awaiting the outcome of the appeal cases and judicial review before setting out its proposed next steps. The judicial review will help determine how FOS treats complaints, and the paper notes that FOS is unlikely to issue further final decisions pending the Court's decision. Also, the civil cases may inform what legal liability could be owed by brokers and lenders – a key requirement for redress to be payable under a past business review. 

The positive may be outweighed by the fact that the proposed pause is intended to give the FCA the maximum amount of time it would need to implement a statutory redress scheme. This is clearly at the forefront of the FCA's mind and we anticipate proposals will follow quickly if the civil cases and judicial review support the FCA's position.

In closing we're nearly 8 months into the FCA's investigation but it still feels very much like we’re at the early stages – it doesn’t look like we'll be running out of road here anytime soon. 

Responses to the Consultation Paper are due by 28 August 2024 and a policy statement will follow on 24 September 2024