FCA Extends Deadline for Motor Finance Complaints Amid Expanded Scope

Lenders in the UK’s motor finance market have been granted additional time to address an expected surge in complaints following a significant expansion of the complaints process by the Financial Conduct Authority (FCA). The FCA has set a new deadline of December 4, 2025, for lenders to respond to customer grievances related to commission arrangements, including both discretionary and non-discretionary commissions. Importantly, this move extends the complaints process to cover not only traditional car finance credit agreements but also car leasing deals.

The change comes after a landmark ruling by the Court of Appeal in October, which declared that car dealers receiving commission from lenders without customers’ informed consent was unlawful. This decision expands the scope of potential claims, as it applies to all commission payments not properly disclosed, including those related to both traditional car loans and leasing agreements.

Previously, the focus had been on discretionary commissions linked to the interest rates on finance agreements, a practice that was banned in 2021. However, the Court of Appeal’s ruling, which does not directly address leasing, has prompted the FCA to include leasing agreements within the complaints process, ensuring that consumers using similar products receive consistent protection and redress.

The FCA had signalled its intent to investigate discretionary commission arrangements in motor finance earlier in 2023. These arrangements allowed dealers to earn commissions based on the interest rates they charged customers, potentially leading to higher borrowing costs. While such commissions were banned in 2021, loans made prior to that date remain under scrutiny, with around 14.6 million affected agreements in total.

The expanded scope of the ruling could impact up to 11.3 million additional loans and leasing agreements, increasing the number of consumers potentially eligible for compensation. The credit rating agency Moody’s has estimated that redress costs could reach as much as £30 billion if the ruling is upheld by the Supreme Court, a figure that would rival the notorious payment protection insurance (PPI) scandal, which cost UK financial institutions around £50 billion in compensation.

Although large banks such as Lloyds, Barclays, and Santander UK may have the financial strength to absorb these costs, smaller and more specialised lenders, including Close Brothers, Aldermore, and car manufacturers’ captive finance arms like Ford and Volkswagen, may face more significant financial challenges.

The FCA’s extension of the deadline and inclusion of leasing agreements aims to provide consumers with a clear and consistent path to redress, while giving lenders time to adjust. With the Supreme Court’s appeal still pending, the motor finance sector is bracing for a wave of claims and potential further clarifications from regulators.