Drivers who may have been mis-sold car finance deals could have to wait until December 4 next year for compensation, after regulators gave firms more time to respond to complaints.
The Financial Conduct Authority (FCA) said it is pushing back the deadline for motor finance firms to respond to customer complaints because companies are taking too long to hand over data.
Regulators are looking into whether lenders mis-sold products to customers by using hidden so-called discretionary commission arrangements.
These saw lenders let brokers and car dealers hike the interest on car finance agreements to increase the amount they get on commission, meaning customers overpay without knowing.
The practice was banned in 2021, after regulators found it was costing drivers far more than the flat fees used in car finance today.
Earlier this year, the FCA warned lenders to bolster their financial positions in case they need to cover a wave of claims, but months later pushed back its own reporting deadline for the probe until May 2025.
We’re investigating whether some car finance customers were charged too much on their loans.
Find out what to do if you think this affects you. https://t.co/LUNPtGMGCN#MotorFinanceComplaints #CarFinance #ConsumerProtection #FinancialServices pic.twitter.com/tD2GN620fx
— Financial Conduct Authority (@TheFCA) September 24, 2024
On Tuesday, the regulator said the “extended pause” on handling complaints will give it time to introduce a potential compensation scheme.
It said: “It is too early to say if we will intervene in this way, but based on our work so far, it is more likely than when we started our review.”
Part of the reason for the delay is because it has “taken us longer than expected to get the data we needed from firms”, it added.
The update comes after Close Brothers, a major seller of motor finance, said it was selling its asset management business to a private equity firm for £200 million to help strengthen its finances amid the probe.
The bank had already set aside £400 million to cover potential costs, as announced in March. It also scrapped dividend payouts for 2024.
Lloyds, which owns car finance firm Black Horse, said earlier this year that it was setting aside about £450 million to cover potential costs relating to the issue and any compensation payouts.
