Car finance complaints being assessed by FCA
The Financial Conduct Authority (FCA) have said that they are assessing the extent of a pre-2021 problem with some car finance arrangements.
Prior to January 2021, some brokers were permitted by lenders to adjust the interest rates on the car finance they arranged for customers.
The rates were linked to the amount of commission that the broker received, and so typically a higher interest rate would mean a higher amount of commission for the broker. This was called a discretionary commission arrangement and naturally led brokers to increase the amount people were charged on their car loan.
The FCA banned this practice in 2021, however there has been a high number of complaints since then about loans that were arranged before 2021.
The FCA report that lenders and brokers are generally rejecting complaints and so they are now examining the issue.
They have also paused the 8-week response deadline that providers have to respond to complaints within. Providers will have until 25 September 2024, at the earliest, to respond.
This is because borrowing of this type is not covered by the Financial Services Compensation Scheme and due to the high number of possible complaints there is a risk of providers going out of business and complainants not getting back any of the money they are owed. Dealing with complaints in an orderly way should minimise this risk.
As a result, the FCA have also lengthened the time available to take a complaint to the Financial Ombudsman from 6 months up to 15 months.
For more details and what your next steps should be if you think you might be owed compensation, please see: https://www.fca.org.uk/consumers/car-finance-complaints