Britain’s financial watchdog is set to extend the deadline for car finance providers to respond to complaints about commission payments in a scandal that has rocked the sector.
The Court of Appeal ruled last month that commissions paid between banks and brokers on car deals may be unlawful as they were not clearly flagged to customers.
It sent shockwaves through the market as it placed much higher levels of transparency requirements on lenders.
Shockwave: The Court of Appeal ruled last month that commissions paid between banks and brokers on car deals may be unlawful because they were not clearly flagged to the customer
And it has drawn parallels with the scandal over mis-selling of payment protection insurance (PPI), which ended up costing banks £50billion.
Estimates of the cost of the latest episode put it at £16billion though this look set to rise,
Lenders including Lloyds have seen their shares hit as concerns mount. Firms such as Close Brothers, one of the UK’s oldest merchant banks, have suspended new car loans.
But yesterday the Financial Conduct Authority (FCA) said it was considering giving firms more time to assess complaints so they could be ‘efficiently and effectively handled’.
‘This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market,’ it said in a statement.
The FCA launched a review this year into whether motorists had been overcharged due to ‘discretionary commission arrangements’ used by the sector before they were banned in 2021.
These allowed dealerships and brokers to set the interest rate on deals, encouraging brokers to charge higher rates without regard to the loan’s size, length or customer credit scores.
The FCA’s latest proposals, expected within the next fortnight, would, if implemented, give firms more time to reply to complaints.
It said: ‘Motor finance firms are likely to receive a high volume of complaints in response to the Court of Appeal judgment.’
The watchdog also said it would write to the Supreme Court to ask if the judgment could be appealed.
It added any extension would cover at least the period up until a decision by the court on whether to grant the appeal.
Close Brothers and FirstRand – both involved in the case – are already planning to appeal.
Should that be granted, the regulator said it wanted a quick decision ‘given the potential impact of any judgment on the market and the consumers who rely on it’.
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Saxo
Saxo
Get £200 back in trading fees
Trading 212
Trading 212
Free dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
Compare the best investing account for you
