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Watchdog gives lenders a year to respond to UK car finance complaints Watchdog gives lenders a year to respond to UK car finance complaints
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Financial Conduct Authority sets 4 December 2025 deadline for handling rising number of customer queriesFinancial Conduct Authority sets 4 December 2025 deadline for handling rising number of customer queries
The City regulator has given lenders a year to respond to the rising number of customer complaints over the way they were sold car loans, after a high court ruling left firms fearing a potential £30bn compensation bill.The City regulator has given lenders a year to respond to the rising number of customer complaints over the way they were sold car loans, after a high court ruling left firms fearing a potential £30bn compensation bill.
The Financial Conduct Authority said firms had until 4 December 2025 to provide a final response to agreements not involving a discretionary commission arrangement (DCA), in line with a deadline that had already been provided for complaints involving DCAs. The Financial Conduct Authority said firms had until at least 4 December 2025 to provide a final response to agreements not involving a discretionary commission arrangement (DCA), in line with a deadline that had already been provided for complaints involving DCAs.
DCAs allowed brokers to adjust the interest rates on motor finance, while non-DCAs do not.DCAs allowed brokers to adjust the interest rates on motor finance, while non-DCAs do not.
A court of appeal ruling in October said it was unlawful for two lenders to have paid a “secret” commission to car dealers without first telling the customer about the commission and getting their informed consent to the payment.A court of appeal ruling in October said it was unlawful for two lenders to have paid a “secret” commission to car dealers without first telling the customer about the commission and getting their informed consent to the payment.
Some lenders have since been flooded with complaints, including from claims management companies and claims law firms.Some lenders have since been flooded with complaints, including from claims management companies and claims law firms.
Motor finance companies are likely to receive a high volume of complaints after the judgment, the FCA said.Motor finance companies are likely to receive a high volume of complaints after the judgment, the FCA said.
The watchdog had previously suggested the deadline could be set at the end of May or early December, and has opted for the latter. It said it extended the time companies had to handle complaints to “help prevent disorderly, inconsistent and inefficient outcomes for consumers and firms”.The watchdog had previously suggested the deadline could be set at the end of May or early December, and has opted for the latter. It said it extended the time companies had to handle complaints to “help prevent disorderly, inconsistent and inefficient outcomes for consumers and firms”.
Last week, the supreme court granted permission for two car lenders, Close Brothers and the MotoNovo owner, FirstRand, to appeal against the court of appeal ruling in October. The FCA said on Thursday it planned to formally intervene in the case to share its expertise with the supreme court.Last week, the supreme court granted permission for two car lenders, Close Brothers and the MotoNovo owner, FirstRand, to appeal against the court of appeal ruling in October. The FCA said on Thursday it planned to formally intervene in the case to share its expertise with the supreme court.
The watchdog stressed that while the supreme court heard the appeal, firms must still comply with the law as it stood when arranging new motor finance agreements. The supreme court has not yet set a date for the hearing, but said it would take place by the end of the next legal term, 16 April 2025. That could lead to a decision by summer or autumn next year.The watchdog stressed that while the supreme court heard the appeal, firms must still comply with the law as it stood when arranging new motor finance agreements. The supreme court has not yet set a date for the hearing, but said it would take place by the end of the next legal term, 16 April 2025. That could lead to a decision by summer or autumn next year.
The FCA’s top lawyer, Stephen Braviner Roman, said recently that the motor finance mis-selling scandal could ultimately be as big as the payment protection insurance (PPI) mis-selling saga, which cost UK banks £50bn.The FCA’s top lawyer, Stephen Braviner Roman, said recently that the motor finance mis-selling scandal could ultimately be as big as the payment protection insurance (PPI) mis-selling saga, which cost UK banks £50bn.
More than 2 million people take out car finance loans every year.More than 2 million people take out car finance loans every year.
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The deadline extension will cover motor leasing as well as motor finance credit agreements. The court of appeal’s judgment did not involve motor leasing.The deadline extension will cover motor leasing as well as motor finance credit agreements. The court of appeal’s judgment did not involve motor leasing.
“However, consumers also use leasing to access motor vehicles, and it is important that consumers using similar products for similar purposes are treated in the same way,” the FCA said.“However, consumers also use leasing to access motor vehicles, and it is important that consumers using similar products for similar purposes are treated in the same way,” the FCA said.
Consumers have until 29 July 2026 or 15 months from the date of their final response letter from the firm, whichever is later, to refer a non-DCA complaint to the financial ombudsman, instead of the usual six months.Consumers have until 29 July 2026 or 15 months from the date of their final response letter from the firm, whichever is later, to refer a non-DCA complaint to the financial ombudsman, instead of the usual six months.
The watchdog launched a review into historical motor finance DCAs in January to examine whether there was widespread misconduct before they were banned in 2021, whether consumers have lost out and, if so, the best way to ensure they receive compensation.The watchdog launched a review into historical motor finance DCAs in January to examine whether there was widespread misconduct before they were banned in 2021, whether consumers have lost out and, if so, the best way to ensure they receive compensation.