Millions of drivers could be left waiting more than a year for compensation for hidden car finance commissions after a new ruling by the Financial Conduct Authority (FCA).
The regulator has proposed extending response deadlines until December 2025 to allow car finance firms more time to deal with the payout scandal.
The extension comes after the regulator announced it will consult on new timelines for firms handling complaints about non-discretionary commission arrangements in motor finance deals.
The proposed extension aims to prevent "disorderly, inconsistent and inefficient outcomes" as finance companies face an expected surge in complaints following a recent Court of Appeal ruling.
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The ruling opened the floodgate for car finance deals which incorporated commission payments to be scrutinised.
The Court of Appeal ruled in October that car dealers receiving commission from lenders without customer consent was “unlawful”, affecting both fixed and discretionary commission arrangements.
The court determined that borrowers should have been informed of all material facts that could influence their decision, including commission amounts and calculation methods.
FCA Chief Executive Nikhil Rathi said: "The Court of Appeal's ruling means many customers who bought a car using finance through a dealer could be owed compensation.
"We want to make sure that consumers who are owed money get it in an orderly way, and that the motor finance market continues to provide competitive deals for the millions of people that rely on it."
The FCA is now consulting on two options for extending complaint-handling deadlines for motor finance firms. The first option would extend the deadline until May 31, 2025, allowing time to learn whether the Supreme Court will grant permission for appeal.
The second option proposes a longer extension until December 4, 2025, which would align with existing rules for firms handling discretionary commission complaints. The regulator plans to announce its next steps on discretionary commission arrangement (DCA) complaints in May 2025.
Adrian Dally, the Finance and Leasing Association's director of motor finance and strategy, said: “This is a welcome move, practical help for the industry in the interim as we wait for a Supreme Court ruling.”
Subject to any Supreme Court decision, the FCA would simultaneously update its guidance on non-DCA commission complaints. The extended timeline reflects delays in obtaining necessary data from firms and the need to consider the outcomes of relevant court decisions.
The regulator warned that firms must use this additional time to ensure they have sufficient resources to investigate and respond to complaints effectively.
The car scandal has already impacted bank valuations significantly, with major institutions setting aside hundreds of millions of pounds for potential claims.
Stephen Haddrill, Director General of the FLA, called the extension "a sensible move" but stressed the need for "an expedited path to the Supreme Court."
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Meanwhile, consumers can still submit complaints to their providers, though they should be aware of time limits. The FCA has confirmed that consumers will have until July 29 2026, or 15 months from their final response letter, to refer complaints to the Financial Ombudsman Service.
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The regulator has proposed extending response deadlines until December 2025 to allow car finance firms more time to deal with the payout scandal.
The extension comes after the regulator announced it will consult on new timelines for firms handling complaints about non-discretionary commission arrangements in motor finance deals.
The proposed extension aims to prevent "disorderly, inconsistent and inefficient outcomes" as finance companies face an expected surge in complaints following a recent Court of Appeal ruling.
Do you have a story you'd like to share? Get in touch by emailing [email protected]
The ruling opened the floodgate for car finance deals which incorporated commission payments to be scrutinised.
The Court of Appeal ruled in October that car dealers receiving commission from lenders without customer consent was “unlawful”, affecting both fixed and discretionary commission arrangements.
The court determined that borrowers should have been informed of all material facts that could influence their decision, including commission amounts and calculation methods.
FCA Chief Executive Nikhil Rathi said: "The Court of Appeal's ruling means many customers who bought a car using finance through a dealer could be owed compensation.
"We want to make sure that consumers who are owed money get it in an orderly way, and that the motor finance market continues to provide competitive deals for the millions of people that rely on it."
The FCA is now consulting on two options for extending complaint-handling deadlines for motor finance firms. The first option would extend the deadline until May 31, 2025, allowing time to learn whether the Supreme Court will grant permission for appeal.
The second option proposes a longer extension until December 4, 2025, which would align with existing rules for firms handling discretionary commission complaints. The regulator plans to announce its next steps on discretionary commission arrangement (DCA) complaints in May 2025.
Adrian Dally, the Finance and Leasing Association's director of motor finance and strategy, said: “This is a welcome move, practical help for the industry in the interim as we wait for a Supreme Court ruling.”
Subject to any Supreme Court decision, the FCA would simultaneously update its guidance on non-DCA commission complaints. The extended timeline reflects delays in obtaining necessary data from firms and the need to consider the outcomes of relevant court decisions.
The regulator warned that firms must use this additional time to ensure they have sufficient resources to investigate and respond to complaints effectively.
The car scandal has already impacted bank valuations significantly, with major institutions setting aside hundreds of millions of pounds for potential claims.
Stephen Haddrill, Director General of the FLA, called the extension "a sensible move" but stressed the need for "an expedited path to the Supreme Court."
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Meanwhile, consumers can still submit complaints to their providers, though they should be aware of time limits. The FCA has confirmed that consumers will have until July 29 2026, or 15 months from their final response letter, to refer complaints to the Financial Ombudsman Service.
Find Out More...