Watchdog mulls giving car finance firms more time to handle complaints

(Sharecast News) - The UK's financial watchdog is considering giving firms more time to handle motor finance complaints, it confirmed on Thursday. The Financial Conduct Authority, which is investigating potentially mis-selling in car finance, said the decision was prompted by a key legal judgement decision.

The Court of Appeal ruled on 25 October that it was illegal for banks to pay commission to a car dealer without the customer's informed consent.

The FCA said firms who provide motor finance are likely to receive a high volume of complaints in light of the judgement. The two lenders involved in the cases also intend to appeal.

The regulator is therefore consulting on options to extend timelines for firms dealing with complaints about non-discretionary commission.

Allowing more time to "efficiently and effectively" handle complaints would help prevent "disorderly, inconsistent and inefficient outcomes for consumers and firms", the FCA argued.

Two new deadlines are being consulted on. The first is 31 May 2025, reflecting how long it could take to hear whether the Supreme Court has granted permission to appeal.

The second is 4 December 2025, which would align with rules already in place for firms that are dealing with discretionary commission arrangements (DCAs) complaints. The FCA banned DCAs in 2021.

Nikhil Rathi, the watchdog's chief executive, said: "We want to make sure that consumers who are owed money get it in an orderly way, and that the motor finance market continues to provide competitive deals for the millions of people that rely on it."

On Wednesday, Banco Santander's UK arm announced it had put aside £295m to cover possible legal costs and redress associated with motor finance claims, weighing heavily on profits. Earlier this year, Lloyds Banking Group - the UK's biggest provider of motor finance - set aside £450m.