The FCA has now paused the 8-week deadline for motor finance firms to provide a final response to complaints about motor finance agreements where a DCA existed, stating that firms will not have to respond to complaints until after 25 September 2024, at the earliest. They have also extended the time period for consumers to refer their complaint to the Financial Ombudsman from six to fifteen months. There are two reasons for this:

• The first is to provide the FCA with time to assess if there has been widespread misconduct.
• Second, the FCA wants to identify how to ensure customers owed compensation receive this in an orderly, consistent and efficient way.

The FCA’s announcement is likely to trigger thousands more complaints as drivers seek compensation, placing significant financial and operational stress on finance providers. Commentators such as Martin Lewis are already suggesting this might be the motor finance equivalent of the PPI scandal. According to RBC, the scope of the FCA review includes around £300bn in lending, and UK banks could be on the hook for up to £13 billion in compensation.

What can motor finance firms do now?

Whilst there are many avenues to explore, including the potential reallocation of capital, the following steps are a good place to start for impacted firms:

1. Shore up complaints processes and confirm capacity.
   Motor Finance firms can expect more complaints, both DCA and non-DCA focused, over the coming months. They should review whether their complaints handling process is ready to scale dramatically if needed. For DCA cases, they should be ready to inform claimants of the new timeframes and gather associated evidence to support their eventual resolution.
   
   
2. Ensure agreements are linked correctly to customers
   It will be increasingly important to link agreements correctly to customers and ensure easy access for complaints handling teams. Categorising agreements and creating a single source of truth will help prioritise areas of risk and guide resource allocation. This exercise may prove more complex than expected but will likely save time as complaints increase. As part of this work, records held with a lender or intermediaries should be put in a legal hold (regardless of whether the customer has complained or not) and digitised to review and assess them more efficiently.
   
   
3. Review previous motor commission complaints
   Previous complaints should be assessed to understand if (based on the new findings) these were correctly or incorrectly rejected. We recommend proactively addressing these outcomes accordingly following further guidance from the FCA.
   
   
4. Complete a risk and control self-assessment (RCSA) against the sales processes
   The FCA are highlighting concerns around DCA sales processes. When combined with the new Consumer Duty obligations, firms will benefit from assessing the risk and controls framework surrounding these processes to highlight any remedial areas.
   
   
5. Ensure customers are aware of the time limit changes for handling DCA related complaints
   In anticipation of greater press coverage and consumer awareness, it may be prudent to send an outbound customer communication explaining DCA agreements and the complaints process, with links and signposts to FCA support and materials.
   
   
6. Set up a programme to provide control and clarity across all activities
   Motor finance agreements will fall under regulatory scrutiny in the coming months. Setting up a central mechanism to define and document the approach taken, and track related items, will prove invaluable in managing internal and external stakeholders, and being able to respond promptly to regulatory interest.