© Reuters. General view of the Financial Conduct Authority (FCA) offices in London, Britain, May 4, 2022. REUTERS/Peter Nicholls/File Photo
LONDON (Reuters) – Britain’s Financial Conduct Authority said on Thursday it would kickstart a study of the motor finance industry, amid rising tensions between consumers and lenders on discretionary commission arrangements.
In 2021, the watchdog banned incentives for brokers to increase the interest rate that a customer pays for their motor finance. But many customers have logged complaints to firms claiming compensation for commission arrangements struck prior to the ban, the FCA said.
Motor finance firms are rejecting most complaints because they believe they have not acted unfairly nor caused customer loss based on the applicable legal and regulatory requirements at the time, the watchdog added.
The FCA said it would use its powers under S166 of the Financial Services and Markets Act 2000, to review historical arrangements and sales across several firms, to ensure fair practice.
“If we find there has been widespread misconduct and that consumers have lost out, we will identify how best to make sure people who are owed compensation receive an appropriate settlement in an orderly, consistent and efficient way,” the FCA said in a statement.
The FCA said it would pause the 8-week deadline for motor finance firms to provide a final response to relevant customer complaints.
Consumers will also have up to 15 months to refer their complaint to Financial Ombudsman, rather than usual 6 months, the FCA said.
