FCA Extends Deadline on Respones to Motor Finance Complaints

Interesting extension from the FCA on car lease interest rates and finance, which suggests that the new Labour government will be seeking to amend, or cap the level of interest on things like EV car leasing in the near future. It’s just an opinion, IE has no inside track to the Westminster bubble.

The bigger question for insurers is whether the interest rate might be capped on insurance premium finance plans next year, or new rules about accepting high risk/CCJ consumers for car insurance monthly payment plans might be brought in, to make things more affordable for `vulnerable consumers.’

Again, it’s a wait and see from the FCA, but a redress scheme for those who have paid up to 40% APR on their car insurance – which they need by law – might not be far away and could potentially cost the insurance sector millions next year.

Here’s the statement from the FCA;

We’re proposing to extend the current pause to the time firms have to respond to consumers about motor finance complaints involving a discretionary commission arrangement (DCA).

We now intend to set out next steps in our review into the past use of DCAs in May 2025. By then, we expect to have analysed the data we have collected from firms and assessed the outcome of the Barclays judicial review of the Financial Ombudsman’s decision to uphold a DCA complaint.

Our next steps could involve consulting on a redress scheme. This is why we intend to take the precautionary step of pausing complaint handling until 4 December 2025, as it may take until then to confirm how firms would implement it. Or it could involve asking firms to start dealing with complaints again as usual, in which case we would consult on ending the pause earlier.

If we can set out our proposed next steps sooner, we will.

INDUSTRY COMMENT

Darren Richards, Head of Broadstone’s Insurance, Regulatory & Risk division, said: “The extension of the FCA’s motor finance probe demonstrates the complexity involved in this issue, especially for firms to gather and provide the correct data while there are also legal ongoing proceedings. It gives the regulator the time and space to review this data, await legal reviews and come to the best conclusion.

“The FCA also suggest that the possibility of redress payments is now more likely as they work through this process. It means that firms should continue their preparations around how they would meet the costs of resolving consumer complaints and the potential total liability.

“These costs are likely to be significant while the redress scheme itself could prove costly and time-consuming. All in all, this latest update from the FCA seems to confirm that this probe looks set to rumble on as public and regulatory scrutiny grows.”