Car finance lenders have been given more time to respond to customer complaints about hidden commission payments.
It comes after the Court of Appeal ruled customers should be clearly told how much commission would be paid, and they would need to consent to this - otherwise it would be illegal for the lender to pay any commission to the dealer. One of the lenders involved in the case, Close Brothers, has since been granted permission to appeal against the ruling.
It marked the latest development into the car finance investigation, with lenders gearing up to potentially pay out billions of pounds to consumers who were potentially mis-sold motor deals. In line with this, car finance lenders have been told by the Financial Conduct Authority (FCA) that they now have until December 4 next year to respond to complaints about hidden commission payments.
The FCA has been carrying out a separate investigation into so-called discretionary commission arrangements, which saw dealers fix higher interest rates on credit agreements, meaning consumers were charged more without knowing. The practice was banned in 2021. Crucially, the new pause by the FCA includes car leasing - unlike the separate investigation into discretionary commission arrangements, which did not include car leasing. The FCA is aiming to set out the next steps in its review on in May next year.
Martin Lewis reacted to the update today and urged people to still put in a complaint if they feel they were mis-sold. In a post on X, he said: "The fact leasing has been brought into scope significantly widens the potential number of complainants. Yet all this is dependent on the Supreme Court agreeing with the Court of Appeal when it hears the appeal in Spring(ish), and that is far from certain. The pause doesn't stop people complaining. It just says firms don't have to make a decision on the complaint while the ruling is awaited."
The FCA said: “Firms who provide motor finance are likely to receive a high volume of complaints in response to the judgment. We have extended the time firms have to handle complaints to help prevent disorderly, inconsistent and inefficient outcomes for consumers and firms.”
The FCA added: “What we can say in May will depend on the progress of the appeal to the Supreme Court and the timing and nature of any decision. If we can end the complaint handling extension sooner than December 2025, we will. Motor finance is an important market, serving over two million consumers a year. In deciding next steps, we’ll consider how to make sure affected consumers are appropriately compensated and the market continues to work well, with effective competition.”