Claims
FCA Updates on Car Finance Commission Complaints
If you’ve used car finance to purchase a car, motorbike, or van, it’s likely that the lender paid the broker (usually your car dealer) a commission for arranging the loan. Recent updates from the Financial Conduct Authority (FCA) and the Court of Appeal have significant implications for such arrangements.
Court of Appeal Ruling
On 25 October 2024, the Court of Appeal ruled on three cases involving car finance. The court determined that it was unlawful for dealers to receive a commission from the lender without first informing the customer about the commission and obtaining their informed consent.
Informed consent requires disclosure of:
- The amount of the commission.
- How the commission is calculated.
The lenders involved are appealing this decision to the Supreme Court. Until overturned, this ruling stands as law, and car finance providers must comply.
Complaints About Discretionary Commission Arrangements (DCAs)
Before 2021, some lenders allowed brokers to adjust the interest rates offered on car finance. Brokers earned higher commissions by securing higher interest rates, creating a potential conflict of interest. These arrangements, known as discretionary commission arrangements (DCAs), were banned in 2021.
Extended Timeframes for Complaints
To manage the anticipated volume of complaints following the Court of Appeal ruling, the FCA has extended deadlines:
- Providers have until after 31st May 2026 to respond to complaints about all types of car finance commission.
- Consumers have until at least 29 July 2026 to refer complaints to the FOS.
FCA Review and Future Updates
The FCA is currently reviewing DCAs and plans to announce next steps in May 2025. This review will also address complaints about non-DCA commission arrangements. The outcome may depend on the progress and decisions of the Supreme Court’s appeal listed for April 2025.