Information for firms on motor finance complaints

Information for firms affected by our review into the historical use of discretionary commission arrangements (DCAs) in the motor finance industry.

We’re using our powers under s166 of the Financial Services and Markets Act 2000, to review sales of historical motor finance commission arrangements across several firms.

As part of this, we've introduced new rules that came into force on 11 January 2024. These rules will help us ensure that our approach to providing any potential redress leads to the right outcomes for consumers and the effective functioning of the motor finance market.

We’re:

pausing, for 37 weeks, the requirement on firms to provide a final response to a complaint about motor finance agreements with discretionary commission arrangements (DCAs) within 8 weeks of receiving the complaint 
extending the time consumers have to refer DCA complaints to the Financial Ombudsman Service from 6 to 15 months, if the firm sent its final response to the complaint within the period specified in the rules

What you need to do

If your firm is affected by these changes, you must ensure that you comply with the rules in Appendix 5 of the Dispute Resolution: Complaints Sourcebook (DISP App 5) that are relevant to your business.

Keeping customers informed

We expect your firm to respond to consumer queries in line with your existing policies. You can refer customers to our consumer webpage for more information on how the rules affect them.
If customers have already made a complaint to your firm, you should keep them informed of the progress in resolving their complaint.
In line with the customer support outcome under the Consumer Duty, you should respond promptly to queries from customers on whether their motor finance agreements included a DCA, as this may help them decide if they should make a complaint.
You must update the information you publish for consumers on how you handle complaints, for example, information on your website. This is to make sure consumers are informed of the changes to the time limits.

Dealing with DCA complaints

For DCA complaints received between 17 November 2023 and 25 September 2024 inclusive, we’ve paused the 8-week time limit for sending a final response to the complainant for 37 weeks. This means that, during this period, you don’t have to send final responses to DCA complainants.
Your written acknowledgement to complainants of any DCA complaint, must include an explanation of the pause to the time limits for dealing with their complaint. You must also tell them why the time limits have been paused (see from 2.21 of PS24/1 (PDF) 'Keeping complainants informed about complaint handling time limits').
If you’ve already sent a written acknowledgement of a DCA complaint, you must promptly write to the complainant again and tell them about the pause and the reason for it.
In cases where you can easily identify that the DCA isn’t a relevant consideration, we encourage you to provide a final response (ie within 8 weeks). Examples of where it might be appropriate for you to provide a final response while the pause is in place include:
- where a consumer who’s previously complained about commission, and received a final response, wishes to raise a different complaint
- where it’s possible to resolve the complaint without having to consider whether the DCA element of the agreement was fair or not

Giving customers more time to refer DCA complaints to the Financial Ombudsman

You must write to complainants who were sent a final response to a DCA complaint between 12 July 2023 and 10 January 2024 inclusive. You must explain that they now have 15 (rather than 6) months from the date of your final response to refer their complaint to the Financial Ombudsman.
If you send a final response to a DCA complaint between 11 January 2024 and 20 November 2024 inclusive, you must give complainants 15 months to refer their complaint to the Financial Ombudsman.

Record retention requirements

Under our general rules on record retention, you must arrange for orderly records to be kept of your business. This includes all services and transactions you’ve undertaken. You should retain records for as long as they’re relevant for the purposes for which they were made.
Lenders and credit brokers must maintain and preserve any records that are, or could be, relevant to the handling of complaints or civil claims relating to agreements with DCAs entered into before 28 January 2021. This is regardless of whether the customer has complained or not. This requirement applies until 11 January 2025, 1 year from when the rule came into force. (See point 2.38 of PS24/1 (PDF)).
If you fail to keep documents or records relating to DCA complaints, you must still investigate the complaint fairly.

Our diagnostic work

We’re appointing a skilled person to review historical motor finance commission arrangements and sales across several firms. All firms participating in this work have now been informed.
We may carry out further sampling of other firms if needed.
Our review will include sales involving discretionary commission arrangements made from 6 April 2007 to 28 January 2021. We are looking at sales from 6 April 2007 because the Financial Ombudsman cannot generally look at complaints about this type of consumer credit before this date.

Making offers of redress to customers

If you choose to provide a final response to a DCA complainant, or make an offer of redress during the pause, you must comply with the usual requirements in DISP. This includes the complaint resolution rules in DISP 1.4 that cover investigating, assessing and resolving complaints, and co-operating with the Financial Ombudsman.

If a complaint was made more than 8 weeks before the pause, and you hadn’t provided a final response by 11 January 2024

Some consumers may have complained before 17 November 2023. If you didn’t send a customer a final response by 11 January 2024, but you sent them a written holding response informing them that they may now refer their complaint to the Financial Ombudsman, these complaints won’t be captured by our rules.
A written holding response doesn’t start the time a complainant has to refer a complaint to the Financial Ombudsman for the purposes of DISP 2.8.2R(1). We’ve said that consumers who wish to wait and give you more time to provide them with a final response before referring their complaint to the Financial Ombudsman can do so (see 2.29 of PS24/1 (PDF)).
If the 8 weeks expired before the pause started and the complaint is referred to the Financial Ombudsman, you should cooperate with the Financial Ombudsman in the usual way, as required by DISP.

Decisions by the Financial Ombudsman

The Financial Ombudsman will continue to investigate and determine complaints that have been correctly referred to it based on what it considers to be fair and reasonable in all the circumstances of the complaint. If you receive a request from the Financial Ombudsman, you should cooperate with it in the usual way, as required by DISP.
If you receive a final decision from the Financial Ombudsman that's accepted by the consumer, we expect you to pay any award by the date given in the decision.

Dealing with non-DCA complaints

If a complaint is about a regulated credit agreement for motor finance but a broker wasn’t acting under a DCA, then it won’t fall within the pause introduced on 11 January 2024. The usual DISP rules will apply to these complaints.
Similarly, the usual DISP rules will also apply to complaints about regulated credit agreements for other types of finance, even if DCAs were involved. For example, regulated finance agreements for towed caravans.
The Financial Ombudsman will continue to investigate and determine complaints not covered by the pause based on what it considers to be fair and reasonable in all the circumstances of the complaint. Firms should cooperate with the Financial Ombudsman in the usual way, as required by DISP.

Maintaining adequate financial resources

On 12 April 2024, we wrote to motor finance lenders and brokers reminding them of the need to maintain adequate financial resources at all times. This includes to cover any additional operational costs from increased complaints and, where applicable, to meet the costs of resolving those complaints.
In June 2020, we published our framework document (FG20/1) on the role of financial resources in minimising harms, and practices firms can adopt when assessing adequate financial resources. This should prove helpful in your ongoing assessment of whether your firm is maintaining adequate financial resources.

Consumer Duty

The changes we’ve made don't change our expectations of firms in relation to the Consumer Duty.
You should be critically assessing your firm's customer service performance and anticipating increased customer contact. We expect you to be operationally prepared and properly resourcing your customer facing functions to meet increased demand.

Page updates

26/01/2024 : Information added diagnostic work section update

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