FOS to continue investigating car finance commission complaints

Assertion comes amid pending reviews and court proceedings

FOS to continue investigating car finance commission complaints

Motor & Fleet

By Terry Gangcuangco

“We’ll continue to accept and investigate complaints as far as we can.”

Those were the words of the Financial Ombudsman Service (FOS) in its car finance commission complaints update aimed at clarifying how complaints are being progressed amid pending reviews and court hearings.

The FOS noted: “In March, three court cases relating to car finance commission were granted permission to go to the Court of Appeal. The Court of Appeal hearing has not yet taken place. The Court of Appeal’s decision is expected to consider how the law relating to secret and half-disclosed commission might apply to motor finance commission payments. 

“In April, Clydesdale Financial Services Limited – trading as Barclays Partner Finance – started judicial review proceedings in relation to one of our decisions. The judicial review hearings have not yet taken place. We recognise that both the judicial review and the Court of Appeal’s decisions could have an impact on our approach to complaints that include similar issues.

“In January, the Financial Conduct Authority (FCA) announced a review of the historical use of motor finance discretionary commission arrangements. As part of this, the FCA paused the requirement for firms to issue final responses in some DCA (Discretionary Commission Arrangement) cases. The FCA has committed to provide further information about next steps by September 24, 2024. 

“At this point, we don’t know when we can expect the decisions from the courts. That means we’re unlikely to be able to issue final decisions on affected cases for some time. However, while both the FCA review and court proceedings take place, we’ll continue to accept and investigate complaints as far as we can.”

According to the FOS, it will continue to process the complaints to ensure that it has the information needed to issue decisions as soon as it is appropriate to do so. Charging ahead will also allow the FOS to identify whether the complaint is likely to be affected by court proceedings, as well as issue investigator provisional assessments and ombudsman final decisions on cases that aren’t impacted.  

“It is disappointing that ongoing legal proceedings around motor finance commission have impacted our ability to issue final decisions in some of these cases,” Deputy Chief Ombudsman James Dipple-Johnstone said.

“However, we’re determined to progress consumers’ complaints as far as we can, and firms should continue to investigate and respond to complaints promptly.”

Commenting on the update, Chartered Insurance Institute veteran Branko Bjelobaba (pictured) stated: “Good to see that the Financial Ombudsman Service has published an update about car finance commission cases where they have around 20,000 open complaints…

“This will be very interesting when it comes to premium finance, although the need to explain the cost of credit and the requirement to act in the customer’s best interests is something the sector has had to deal with for a couple of years now (brokers are required to demonstrate that the time and costs incurred are directly aligned with the commissions they receive from the finance provider).”

Meanwhile, Bjelobaba is seeking clarification from the Association of British Insurers (ABI) on premium finance for motor insurance, particularly in relation to costs incurred and charged when offering the payment option.

“I approached [ABI general insurance policy director] Mervyn Skeet for clarification as to why some insurers charged for finance (when there is no actual loan – it’s a bit like paying your council tax over 10 months which costs no more than paying it in one go) and some didn’t and what additional costs were incurred in allowing customers to pay this way and am looking forward to his reply.”

Last month, when the ABI unveiled its Premium Finance Principles, the trade body explained: “Monthly administration of payment and reporting requirements on insurers for finance agreements are direct costs, but other factors also impact.

“If a customer is paying monthly and they miss a payment, the insurer continues to provide cover (without having been paid for it) until the missed payment is received or the policy is cancelled.

“Furthermore, if a customer chooses to pay annually, the sum of money is made immediately available to the insurer who can then invest this into their business and help maintain enough funds to pay out claims and keep premiums lower.”

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