The UK Financial Conduct Authority on Wednesday said it will consult on extending the time motor finance firms have to handle complaints about commission payments.
The FCA’s decision follows the Court of Appeal’s judgment late last month in Hopcraft versus Close Brothers Ltd, Johnson versus Firstrand Bank Ltd and Wrench versus Firstrand Bank Ltd.
In the ruling, the court sided with consumers. It determined that motor dealers acting as credit brokers owe both a disinterested duty and a duty of loyalty to their customers.
Close Brothers, which said it will appeal the judgment to the UK Supreme Court, said at the time: ‘This sets a higher bar for the disclosure of and consent to the existence, nature, and quantum of any commission paid than that required by current Financial Conduct Authority rules, or regulatory requirements in force at the time of the case in question.’
LLotds Banking Group PLC said it was assessing the potential impact of the decision.
FirstRand said: ‘This judgement finds that a fiduciary duty suddenly and retrospectively now likely applies to all providers of credit at point of sale which has far-reaching and materially negative implications for the motor finance industry and broader consumer finance sectors in the UK.’
Secure Trust Bank PLC warned that underlying continuing pretax profit in 2024 will be ‘materially’ below market expectations, citing the ruling. The company provides motor finance through the V12 Vehicle Finance and Moneyway brands.
In the ruling, the court decided it was unlawful for brokers and car dealers to receive a commission from the lender providing motor finance without obtaining the customer’s informed consent to the payment. This requires the consumer to be told all material facts such as the amount of the commission and how it was to be calculated.
‘Motor finance firms are likely to receive a high volume of complaints in response to the recent Court of Appeal judgment. Any complaint extension would allow them time to consider how these might be efficiently and effectively handled. This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market,’ the FCA said on Wednesday.
The regulator said it has taken undertaken extensive industry engagement since the judgment and joined an industry and government discussion.
The proposals are expected to be published over the next two weeks, and if taken forward, would mean a complaint extension in place by mid-December.
The proposed complaint extension will cover at least the period until the UK Supreme Court decides whether to grant permission to appeal.
The FCA said: ‘The FCA will write to the Supreme Court asking it to decide quickly whether it will give permission to appeal and, if it does, to consider it as soon as possible, given the potential impact of any judgment on the market and the consumers who rely on it. If permission to appeal is granted, the FCA will consider intervening to share its expertise to assist the Court.’
Close Brothers shares were down 0.7% at 194.60 pence each on Wednesday morning in London, while Secure Trust Bank shares declined 3.2% to 384.18p. Lloyds Banking shares were up 1.5% to 54.68p each.
FirstRand Ltd’s shares were down 0.7% to R 77.05 each in Johannesburg.
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