The Financial Conduct Authority (FCA) has announced it will lift its controversial pause on motor finance complaints two months ahead of its original schedule. The decision accelerates the timeline for millions of consumers seeking redress over secret commission deals.
Deadlines Brought Forward and Extended
In a letter to banking chiefs, the regulator confirmed the complaints pause will now end on 31 May 2026, rather than the previously stated date in late July. Furthermore, the FCA has instructed firms to preserve all relevant records until 11 April 2031 to ensure the transparency of the massive redress scheme.
Sheree Howard, the FCA's Executive Director of Authorisations, stated, "We have been clear that complaints cannot be paused indefinitely." She warned that the pause should not be used as an excuse to delay necessary preparatory work.
The Roots of a Multi-Billion Pound Scandal
The saga stems from the widespread use of discretionary commission arrangements (DCAs), where car brokers and lenders secretly agreed on commission rates, often without the buyer's knowledge. A surge in complaints in early 2024 prompted the FCA to impose the pause and launch an investigation.
The legal battle reached the Supreme Court, which ruled in August that a commission of 55% in one claimant's case was "unfair". This landmark judgment provided clarity but also placed lenders potentially on the hook for an estimated £40bn in compensation.
Industry Backlash and Mounting Provisions
The FCA's handling of the redress scheme has faced criticism from both the financial industry and consumer groups. A key point of contention is the regulator's decision to set the commission threshold for automatic redress at 35%, significantly lower than the 55% cited in the Supreme Court case.
The All-Party Parliamentary Group on Fair Banking has accused the FCA of creating a "£4.4bn gap" in the proposed scheme, suggesting the regulator is being influenced by lender profitability.
Major banks have already been forced to set aside huge sums. Lloyds Banking Group increased its provisions to £2bn, while Close Brothers and Barclays allocated £300m and £325m respectively. Santander UK even postponed its quarterly results, with its CEO calling for government intervention to prevent severe damage to the automotive industry and UK economy.
The FCA has pushed back its final decision deadline to 12 December at 5:00pm and says it will consider all evidence from its ongoing consultation before finalising the rules for one of the largest financial redress exercises in UK history.
