The Financial Conduct Authority (FCA) is sending out reminders to motor finance firms to make sure they’ve got enough money in the bank.

Amidst its ongoing review of historical motor finance discretionary commission arrangements (DCA), the FCA has noticed varying approaches by firms in accounting for the potential impact of past DCA usage on their financial stability. Consequently, the FCA is writing to firms to underscore the imperative of keeping their finances in good shape.

While each firm must assess its own circumstances, the FCA said it expects this to involve planning for any potential additional operational costs arising from increased complaints and, where relevant, to cover the expenses associated with resolving those complaints.

Furthermore, as the FCA’s review progresses, firms are advised to:

• Continue investigating complaints related to DCA usage to facilitate prompt resolution if the pause on complaint handling is lifted.
• Adhere to the Information Commissioner’s Office guidance on responding to data subject access requests, including confirming DCA involvement upon consumer inquiry.
• Notify the FCA of involvement in litigation concerning motor finance commissions subject to, or likely to be subject to, appeal to the High Court or Court of Appeal.

Regarding the review’s progress, although firms involved have cooperated constructively, challenges persist in promptly providing the necessary data to the FCA. Reasons cited include data fragmentation across multiple systems and/or between lenders and brokers, along with instances of incomplete record retention in older cases.

In a significant development, Barclays initiated judicial review proceedings on April 3, contesting the Financial Ombudsman Service’s decision to uphold a complaint linked to DCAs.

Barclays mounts legal challenge to FoS ruling over motor finance claim

Acknowledging the uncertainty over this, the FCA said it aims to offer clarity to consumers and firms swiftly. However, achieving this hinges on promptly receiving comprehensive data from various firms and potentially, the pace and outcome of ongoing litigation.

The FCA commits to outlining its next steps by September 24, 2024, at the latest. It reiterates readiness to extend the review and the current complaint pause if necessary.

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