Lenders in the motor finance market have been granted additional time to address a looming surge in complaints, as the City regulator moves to widen the scope of claims and include leasing agreements.
The Financial Conduct Authority (FCA) has set a new deadline of December 4, 2025 for lenders to respond to customer grievances relating to both discretionary and non-discretionary commission arrangements. Importantly, the complaints process now covers not just traditional car finance credit agreements but also car leasing deals.
This move by the FCA follows a pivotal Court of Appeal decision in October. The court ruled that car dealers receiving commission from lenders without the customer’s informed consent was unlawful, expanding the potential scope of claims for compensation. Previously, the focus had been on discretionary commissions linked to interest rates on finance agreements—a practice that was banned in 2021. Now, the issue may affect all loan commissions that were not properly disclosed, magnifying the industry’s exposure to redress claims.
According to the FCA, the Court of Appeal’s ruling does not directly cover leasing, but the regulator has decided to include such agreements in the complaints process to ensure that consumers using similar products have consistent protection and redress. “Consumers also use leasing to access motor vehicles and it is important that consumers using similar products for similar purposes are treated in the same way,” the FCA said in a statement.
The FCA had already signalled in January that it was investigating the practice of discretionary commission arrangements in motor finance. Such arrangements allowed dealers to earn commissions based on the interest rate they charged customers, potentially leading to higher borrowing costs. These deals were banned from 2021, but legacy loans made before that date remain under scrutiny.
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