FCA - motor finance firms’ financial resources

Financial Conduct Authority statement regarding motor finance firms' financial resources

We are writing to motor finance firms to remind them they must maintain adequate financial resources at all times. 

We are currently reviewing the historical use of motor finance discretionary commission arrangements (DCA). We have observed firms taking different approaches to account for the potential impact of previous use of DCA on their financial resources. So, we are writing to firms to remind them they must maintain adequate financial resources at all times. 

While each firm will need to examine its own specific circumstances, we expect this would include planning for any additional operational costs from increased complaints and, where applicable, to meet the costs of resolving those complaints.

As our review continues, firms should also: 

·      Continue to investigate the complaints they receive involving a DCA.  This will help ensure firms are able to act promptly to resolve complaints if we decide the pause should be lifted and complaint handling should resume. Even if we decide that DCA complaints should be resolved through an alternative approach, it is highly likely that firms will need to take similar steps.

·      Consider the Information Commissioner's Office guidance on responding appropriately to data subject access requests. Firms should confirm, if a consumer asks, whether their agreement involved a DCA, even if they haven't submitted a data subject access request. 

·      Notify us if they are involved in litigation relating to motor finance commissions that are subject to, or likely to be subject to appeal to the High Court or Court of Appeal.

Firms can find more information on what they need to do on our motor finance complaints page.

Progress of our review 

Firms involved in our review have engaged with us constructively. However, many firms are struggling to promptly provide the data we need. Reasons for this include data being stored on multiple systems and / or being spread between lenders and brokers. In some older cases, firms have not retained all relevant records.

On 3 April 2024, Barclays commenced judicial review proceedings of the Financial Ombudsman Service's decision to uphold a complaint relating to DCAs.

We recognise this work has generated some uncertainty. We want to provide certainty to consumers and firms as soon as possible. However, that relies on receiving comprehensive data promptly from a range of firms, and potentially, the speed and outcome of any litigation.

We will set out next steps by 24 September 2024 at the latest, and, as we have indicated previously, if necessary, we will extend our review and the complaint pause currently in place.

As we carry out our work, we are mindful not just of ensuring that consumers are treated fairly but also our objective to ensure markets function well.