U.K. Regulator Proposes Extension for Motor-Finance Companies to Handle Complaints

By Elena Vardon

The U.K.'s financial regulator has proposed extending the time that motor-finance companies have to handle consumer complaints about historical commission arrangements on car loans.

The Financial Conduct Authority said Thursday that it was seeking feedback from involved parties on whether to extend the deadline for firms to provide final responses to complaints to May 31 or Dec. 4, 2025.

The extension proposal follows a Court of Appeal judgment in October that ruled it was unlawful for car dealers to get a commission from motor-finance lenders without the customer's informed consent. This would likely increase the volume of complaints motor-finance firms receive, according to the FCA.

Companies involved, such as Close Brothers, have said they intend to appeal the matter at the Supreme Court. An extension until May would give time to see whether the Supreme Court grants that permission, the FCA said.

In January, the FCA launched a review into historical motor-finance discretionary commission arrangements, before the practice was banned in 2021, to determine whether companies were guilty of overcharging customers for car loans. The publication of the probe's findings was delayed in September until May 2025, which would coincide with one of the proposed extension deadlines.

Lloyds Banking Group is exposed to the probe through its Black Horse brand, the U.K.'s largest motor-finance provider. Santander UK also has a meaningful market share in the motor-finance space, while smaller peer Close Brothers has the largest relative exposure as motor lending represents a significant proportion of its business.

Lloyds booked a 450 million-pound ($569.3 million) provision in its fourth-quarter results for the potential impact of the FCA's review, while Santander UK set aside 295 million pounds to cover the potential costs of the Court of Appeal's ruling. Close Brothers hasn't made a provision but noted a potential financial hit from extra professional and legal costs linked with the Court of Appeal case.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

November 21, 2024 05:42 ET (10:42 GMT)

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