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Link(s):

FCA to consult on extending the time motor finance firms have to handle commission complaints | FCA Transcript of a conference call between the FCA and market analysts on motor finance – November 2024

Context

The FCA will consult on extending the time firms have to respond to consumer complaints about motor finance where a non-discretionary commission was involved, and for consumers to refer them to the Financial Ombudsman Service.

The FCA’s decision, which in itself has no direct impact on insurance distribution firms, follows the Court of Appeal’s 25^th October judgment in Hopcraft v Close Brothers Ltd, Johnson v Firstrand Bank Ltd, and Wrench v Firstrand Bank Ltd.  Since that judgment, the FCA has undertaken ‘extensive industry engagement’ and has, in an unusual step, published a transcript of a telephone conversation between Nikhil Rathi (FCA CEO) and motor finance market analysts.  Matt Brewis, the FCA’s Head of Insurance, was also on the call.

Key points to note and next actions

The announcement contains a useful brief summary of the main reasons behind the Court of Appeal’s judgement:

• The Court of Appeal decided it was unlawful for the brokers (car dealers) to receive a commission from the lender providing motor finance without obtaining the customer’s informed consent to the payment.
• This required the consumer to be told all material facts, including the amount of the commission and how it was to be calculated.
• The judgment related to fixed commission in motor finance agreements as well as discretionary commission arrangements (DCAs), which were banned by the FCA in 2021.
• The focus of the Court of Appeal decision is common law, rather than FCA rules or principles. Firms authorised by the FCA must meet wider legal requirements as well as regulatory rules. The interpretation of common law is rightly for the courts.

Although not directly impacting insurance distributors, there is a clear similarity between the finance commissions which were the subject of the Court of Appeal’s decision and the interest rate overriders commonplace in the premium finance market.  The FCA’s planned premium finance market study will clearly be informed by at least the Court of Appeal’s judgement, and it was interesting that Matt Brewis has been involved in the FCA’s market engagement.