Author: Russell J Kelsall

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FCA publishes a statement on key considerations for any consumer redress scheme for motor finance commissions

Earlier today, on 5 June 2025, the FCA published a statement entitled ‘Key considerations in implementing a possible motor finance consumer redress scheme’. 

The key points from the statement are:

– If the FCA proposes “an industry-wide consumer redress scheme“, it’ll set out rules on how to assess claims and calculate redress.  The aim of the scheme would be to make it “easy for consumers to understand and participate in, without needing to use a claims management company (CMC) or law firm“.

– The FCA has been “speaking with consumer groups, firms and industry trade bodies to get their views on important issues to consider if we do introduce a redress scheme“.  If the FCA decides to propose a redress scheme, it’ll consult on why and explain how it thinks a scheme could work. 

– Given the pre-consultation engagement, the FCA “may decide to have a shorter than normal consultation window (for example, 6 weeks)“.

– There will be seven key principles:

(1) comprehensiveness: the scheme should be as wide “as possible so consumers don’t have to go elsewhere, like court“;

(2) fairness: the approach (both on breach and redress) should be “fair to consumers and firms“;

(3) certainty: providing finality for both firms and consumers;

(4) simplicity and cost effectiveness: easy for consumers to participate and the cost of delivering the scheme should be proportionate for firms;

(5) timeliness: resolve the majority of claims “within a reasonable timeframe“;

(6) transparency: consumers should receive clear explanations of decisions and data on the progress of the scheme should be publicly available; and

(7) market integrity: support the ongoing, long-term availability of high quality, competitively-priced motor finance.

– The FCA acknowledges that there can be tensions between these principles and it will aim to get the balance right.

– Scope of a redress scheme: some features to consider are: (a) opt-in or opt out and (b) calculating redress must be “fair to consumers who’ve lost out” and “ensure the integrity of the motor finance market” (and the FCA acknowledges it has seen some “highly speculative figures by some CMCs and law firms“)

– The FCA continues to say that it’ll “confirm within 6 weeks of the Supreme Court judgment whether we’re proposing to introduce a redress scheme. If so, we’ll also set out timings for when we would issue a consultation“.

– If the FCA proposes to introduce a scheme, the final rules for any scheme would “be in 2026“.  The FCA is also keeping under review whether to make any changes to its Handbook.

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FCA issues statement on its next steps in its motor finance review

Earlier today, on 11 March 2025, the UK Financial Conduct Authority (the FCA) published a statement on its next steps in its motor finance review. The FCA says:

– If, taking into account the Supreme Court’s forthcoming decision on the appeal from the Court of Appeal’s decision in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2024] EWCA Civ 1282, it concludes motor finance customers have “lost out from widespread failings by firms, then it’s likely we will consult on an industry-wide redress scheme“;

– Under a redress scheme, “firms would be responsible for determining whether customers have lost out due to the firm’s failings. If they have, firms would need to offer appropriate compensation. We would set rules firms must follow and put checks in place to make sure they do“;

– The FCA no longer plans to make a further announcement in May 2025. Instead, the FCA will confirm its position “within 6 weeks of the Supreme Court’s decision if we are proposing a redress scheme and if so, how we will take it forward“; and

– The FCA’s next steps on non-discretionary commission arrangements will also be informed by the Supreme Court’s decision.

There are some interesting points from this statement:

– The statutory test under Section 404 of the Financial Services and Markets Act 2000 refers to it appearing to the FCA “that there may have been widespread or regular failure by relevant firms to comply with requirements applicable to the carrying on by them of any activity“. The FCA’s statement that it may (depending on the circumstances) consult on such a scheme is therefore a simple re-statement of part of the test for a consumer redress scheme under the statutory provisions.

– It is unsurprising that the FCA will not make an announcement in May 2025: this seemed inevitable once the lenders were given permission to appeal by the Supreme Court in December 2024.

– There is no mention of the appeal to the Court of Appeal from the High Court’s decision in R (Clydesdale Financial Services Limited) v Financial Ombudsman Service [2024] EWHC 3237 (Admin). This has a ‘hear by’ date of 8 December 2025 and the Court’s consideration of the FCA’s rules and guidance in the Consumer Credit Sourcebook must (it is submitted) be part of the FCA’s wider consideration of whether there has been “widespread or regular failure“.

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FCA makes rules and guidance extending pause for handing complaints about motor finance discretionary commission arrangements

On 24 September 2024, the UK Financial Conduct Authority (the FCA) published a press release and Policy Statement 24/11: ‘Extending the temporary changes to handling rules for motor finance complaints’ (PS24/11). PS24/11 effectively implements the changes proposed by Consultation Paper 24/15: ‘Extending the temporary changes to handling rules for motor finance complaints’.

The changes to DISP Appendix 5 come into force 26 September 2024.

The key changes are:

– the pause on the requirement for firms to provide a final response to DCA complaints within 8 weeks, giving complainants the right to go to the Financial Ombudsman (which was due to end on 25 September 2024) will be extended to 4 December 2025 (see DISP App 5.2.1R(2));

– there are new requirements on keeping consumers informed about the pause (see DISP App 5.2.5AR to DISP App 5.2.5CR);

– the timeframe for consumers who receive a final response on relevant complaints to decide whether to refer their complaint to the Financial Ombudsman is extended to 29 July 2026 (at the earliest) (see DISP App 5.2.9R(3)); and

– requirements to maintain and preserve relevant records will remain in place until 11 April 2026 (see DISP App 5.3.1R(2)(b)).

There are some interesting points for firms:

– the FCA makes it clear that PS24/11 is relevant to “motor finance providers” and “motor finance credit brokers, including motor dealers“;

– the FCA’s view is that neither the original pause, nor these changes, “prevent consumers or their representatives from … taking legal action“;

– the ongoing judicial review (which is due to be heard between 15 and 17 October 2024), and the Court of Appeal cases dealing with commissions (where judgment is reserved), are relevant to the FCA’s decision making; and

– because “many motor finance agreements involving DCAs were made, or ended, more than 6 years ago, it is likely that the 3-year rule [on time-barring] will be more relevant for consumers“.

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FCA consults on further pause for handing motor finance discretionary commission arrangements

🚨 Earlier today, on 30 July 2024, the FCA published a consultation paper entitled ‘CP24/15 – Extending the temporary changes to handling rules for motor finance complaints’ and a press release proposing to extend the current pause to the time that firms have to respond to motor finance complaints about discretionary commission arrangements.

📆 The FCA says it proposes to set out its next steps in May 2025 (and not September 2024).  By then, the FCA says it’ll have analysed: (a) the data it has collected from motor finance firms and (b) the outcome of Barclays’ judicial review of the Financial Ombudsman’s decision to uphold a DCA complaint.

✋ The proposed pause to 4 December 2025 will allow the FCA to (for example) consult on a redress scheme or ask firms to deal with motor finance complaints relating to discretionary commission models.  Firms will not be required to respond to such complaints before 4 December 2025.

📝 The FCA also proposes to give consumers until the later of 29 July 2026, or 16 months from the date of their final response letter, to refer any complaint to the Financial Ombudsman Service.

👨‍💻 The deadline for responding to the consultation is 28 August 2024.

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Automated Vehicles Act 2024 receives Royal Assent

On 20 May 2024, the Automated Vehicles Act 2024 received Royal Assent. The Act says that it will regulate the use of automated vehicles on roads and other public locations, and introduce provisions on vehicle automation. The UK Government also published a news story.

Some of the key points of the Automated Vehicle Act 2024 are:

– It sets out a scheme of authorisation for automated road vehicles (see Part 1). This includes (a) a system of authorisation (see Chapter 1 of Part 1), (b) licensing of operators for vehicle use without a user-in-charge (see Chapter 2 of Part 1), (c) provisions allowing regulatory bodies to ask for information (see Chapter 3 of Part 1), (d) introducing investigatory powers (see Chapter 4 of Part 1), (e) introducing civil sanctions against regulatory bodies (see Chapter 5 of Part 1) and (f) making other regulatory powers and duties (see Chapter 6 of Part 1).

– It introduces criminal liability for vehicle use (including stop and seize powers an offence of using a vehicle without driver or licenced oversight).

– It gives powers to the Police including stop and seizure powers (see Part 3).

The Act will come into force on a future date. The Secretary of State will need to make a commencement order.

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FCA publishes findings of multi-firm review into insurers’ valuations of vehicles

On 27 March 2024, the UK Financial Conduct Authority published its findings into its review of firms’ claims-handling processes for valuing vehicles which have been stolen or written-off (often called ‘total loss’ claims).

Some of the key points are:

– Firms must deal with total loss claims promptly and fairly and in line with their obligations under ICOBS 8.1 leading to firms “identifying a fair estimate” of a vehicle’s market value.

– valuation of vehicles:

* The FCA found some good practice including firms offering settlement values closely aligned to retail prices and the firms used the same guides for valuations as the Financial Ombudsman Service.

* The FCA found some areas for improvement including examples of firms offering values lower than available guide prices, firms making deductions based which could lead to unfair customer outcomes and making ‘initial offers’ which are not the firms’ best offers.

– communicating an initial offer:

* The FCA found good practices of initial offer communications clearly explaining the settlement offers and such offers giving customers an opportunity to give additional information relevant to valuation.

* The FCA found some areas for improvement including ensuring communications do not dissuade customers from challenging valuations.

– handling disputed valuations:

* The FCA found good practices of firms allowing customer to provide additional information relevant to valuation and, where a customer rejects a revaluation, most firms treated such challenges as a complaint.

* The FCA found some areas for improvement including not discouraging customers from disputing valuations and not having enough MI to show that a revaluation did not result in systematically different outcomes for customers.

– outsourcing: the FCA found several areas for improvement including: (a) having better oversight arrangements, (b) better managing conflicts of interest and (c) ensuring that outsourcing did not lead to systematically different customer outcomes.

– treatment of policies after a claim settlement:

* The FCA found some good practices including most firms giving customers the opportunity to substitute a vehicle on the policy for the rest of the term.

* The FCA found some areas for improvements including firms requiring customers to pay the remaining premium from the settlement rather than allowing customers to continue making monthly payments of the premium.

– management information and data collection: the FCA found areas for improvement including (a) collecting basic data on total loss claims, (b) monitoring the average deviation between vehicle valuations and guide prices and (c) demonstrating that appropriate MI was collected and analysed to ensure different approaches do not lead to systematically different customer outcomes.

Insurance firms, and third parties providing insured valuation services, will need to quickly digest the FCA’s findings and make changes (where relevant) with a clearly documented rationale for any steps taken by them. The FCA is likely to pick up all of these themes in any future engagement with such firms.

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FCA decides to investigate the use of personal guarantees given for certain small business lending

On 5 March 2024, the UK Financial Conduct Authority published a press release announcing it is investigating the use of personal guarantees given to lenders to support loans made to certain small businesses. The follows the Federation of Small Businesses making a ‘super-complaint’ to the FCA.

The FCA’s perimeter is, in fact, fairly limited for business lending. It only applies to such lending where (in broad terms):

– the borrower is an individual or a relevant recipient of credit (being a partnership of two or three persons not all of whom are incorporated, or an unincorporated body of persons which does not consist entirely of bodies corporate and is not a partnership); and

– the amount of credit is no more than £25,000.00.

The FCA will:

– collect data between April 2024 and June 2024 to understand when lenders entering into a regulated credit agreement are asking for guarantees;

– review samples of firms’ policies and procedures;

– work with the Financial Ombudsman Service to monitor the level of complaints; and

– consider whether lenders need further guidance in CONC.

The FCA has also published its response to the super complaint.

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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.

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End of an era

So today marks my last day as a partner at TLT LLP. It has been an incredible seven years at the firm and we’ve achieved so much including:

– Winning Best Law Firm at the Car Finance Awards for four consecutive years 🚗 🏆
– Advising on some of the most interesting and challenging issues facing consumer, motor and mortgage finance providers ✍️ 💭
– Building strong and long standing relationships with our fabulous clients and trade associations 💪

It has been a real privilege to work with my colleagues both past and present. And it’s fair to say that I’ve picked up some lifelong friends along the way. There have been a lot of laughs too. So perhaps more of an ‘à bientôt’ than a ‘goodbye’.

I am, however, very excited to start my new role at Walker Morris LLP on 17 April 2023. So after a couple of weeks of fresh air, time with the family, walks on the beach and some delicious food and beverages, I’ll be back talking all things consumer, motor and mortgage!