Motor finance DCA investigation: FCA delays next steps to 2025

The planned announcement on the FCA's motor finance investigation has been postponed from September 2024 to May 2025. There are several key reasons why the regulator took this action.

Data delays

Delays in provision of data by the firms within the Skilled Person Review due to firms not keeping older data, data being stored on multiple systems, or data being spread between lenders and brokers. This has had a knock-on impact on the FCA’s ability to complete its analysis of that information.

Pending decisions

The need to consider the outcomes of relevant litigation, namely:

• Barclays Partner Finance’s judicial review against the Financial Ombudsman Service’s (FOS) decision to uphold a complaint relating to its use of a DCA
• the pending judgments on three further civil cases which have been heard at the Court of Appeal.

The FCA is also consulting on an extension to the pause on complaint handling until December 2025, meaning affected firms won't have to issue a final response to DCA complaints until after 4 December 2025 at the earliest.

While there's no official confirmation, this extension of the pause and other commentary within the FCA’s consultation paper increasingly point to an industry-wide redress scheme. If this were to be the case, the FCA would need to undertake further consultation, and so considers that the extension to December 2025 will give it the maximum amount of time necessary to implement a statutory consumer redress scheme.

However, the FCA does also note that should it decide that a redress scheme isn't the route forward, it's likely to consult on ending the pause on complaint-handling earlier.

What’s next for firms?

While it remains to be seen whether the FCA will instigate a formal industrywide redress scheme, as a minimum, firms will be facing very high numbers of complaints to deal with.

We advise preparing now in advance of the FCA setting out next steps next year. At least, firms should take the following nine actions:

1. Prepare a detailed project workplan and record steps taken
2. Identify your population of DCAs issued during the relevant period
3. Consider the format, quality and availability of data, including any reliance on legacy systems
4. Establish a comprehensive document library of relevant documents stored in a logical order
5. Build a basic model to estimate the potential financial liability
6. Prepare for increased complaint volumes
7. Triage and investigate complaints proactively
8. Establish how the remediation or complaint handling exercise will be funded
9. Identify third-parties to provide any future outsourced support

Following these suggestions should help firms manage the ongoing uncertainty over the outcome of the investigation.

To learn more about the FCA’s motor finance review, complaints handling and remediation, contact Supriya Manchanda or Darren Castle.