We are writing to motor finance firms to remind them they must
maintain adequate financial resources at all times.
We are currently reviewing the historical use of motor finance
discretionary commission arrangements (DCA). We have observed
firms taking different approaches to account for the potential
impact of previous use of DCA on their financial resources. So,
we are writing to firms to
remind them they must maintain adequate financial resources at
all times.
While each firm will need to examine its own specific
circumstances, we expect this would include planning for any
additional operational costs from increased complaints and, where
applicable, to meet the costs of resolving those complaints.
As our review continues,
firms should also:
- Continue to investigate the complaints they receive involving
a DCA. This will help ensure firms are able to act promptly
to resolve complaints if we decide the pause should be lifted and
complaint handling should resume. Even if we decide that DCA
complaints should be resolved through an alternative approach, it
is highly likely that firms will need to take similar steps.
- Consider the Information Commissioner's
Office guidance on responding appropriately to data
subject access requests. Firms should confirm, if a consumer
asks, whether their agreement involved a DCA, even if they
haven't submitted a data subject access request.
- Notify us if they are involved in litigation relating to
motor finance commissions that are subject to, or likely to be
subject to appeal to the High Court or Court of Appeal.
Firms can find more information on what they need to do on
our motor finance complaints
page.
Progress of our review
Firms involved in our review have engaged with us constructively.
However, many firms are struggling to promptly provide the data
we need. Reasons for this include data being stored on multiple
systems and / or being spread between lenders and brokers. In
some older cases, firms have not retained all relevant records.
On 3 April 2024, Barclays commenced judicial review proceedings
of the Financial Ombudsman Service's decision to uphold a
complaint relating to DCAs.
We recognise this work has generated some uncertainty. We want to
provide certainty to consumers and firms as soon as possible.
However, that relies on receiving comprehensive data promptly
from a range of firms, and potentially, the speed and outcome of
any litigation.
We will set out next steps by 24 September 2024 at the latest,
and, as we have indicated previously, if necessary, we will
extend our review and the complaint pause currently in place.
As we carry out our work, we are mindful not just of ensuring
that consumers are treated fairly but also our objective to
ensure markets function well.
