Key Updates on the PCP Motor Finance Scandal
🔥 DISCRETIONARY COMMISSION COMPLAINTS — WHAT YOU NEED TO KNOW
🚨 INTRO: THE DISCRETIONARY COMMISSION BAN & WHY IT MATTERS
In January 2021, the FCA banned Discretionary Commission Arrangements (DCA) in motor finance. This was because the way some commission structures worked could lead to consumers paying higher interest rates than necessary. By early 2024, thousands of consumers had raised concerns with the Financial Ombudsman. Here are a few key outcomes so far:
- Two rulings supported consumers — refunds were awarded.
- One case found fixed fees were acceptable under the rules.
⏸️ FCA PAUSED HANDLING THESE CLAIMS
The FCA placed a temporary pause on some complaint handling to carefully manage the high volume of cases. Originally set to end in September 2024, this pause has been extended until December 2025 while court cases progress and discussions take place on a potential redress scheme.
🕵️ CONSUMERS: WHAT’S HAPPENING
Many people have requested commission details on agreements made before 2021. In some cases, lenders have provided this information, while in others responses are pending. If no discretionary commission was applied, a case may be less likely to progress — but it’s still worth knowing the facts of your own agreement.
⚖️ OCT 2024 APPEAL COURT UPDATE
The Court of Appeal ruled that if a broker earned commission and this was not made clear — including how it was calculated — that could be unlawful. If the Supreme Court upholds this, claims may extend beyond the current limits, potentially including:
- Finance agreements with fixed and non-discretionary commissions.
- Agreements signed after January 2021.
- Other types of finance, such as leasing or caravan finance.
➡️ WHAT NOW? IDEAS & NEXT STEPS
- If you have a discretionary commission case: You may wish to wait for the FCA’s review and any potential redress scheme.
- If your agreement involved fixed commissions: Keep an eye out for updates from your lender and trusted consumer resources, as future rulings could affect scope.
The Supreme Court’s decision will set the direction, and the FCA is also consulting on whether to extend the pause to fixed commission cases. Staying informed is the best way to be prepared.
What is “Affordability”?
Here’s a summary of the regulator’s rules:
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Checking Affordability at Application:
- Lenders must assess whether credit is affordable before approving it.
- The level of scrutiny depends on the type of credit. For instance, a mortgage application might require bank statements, whereas a £200 catalogue credit may need less detailed checks.
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Reassessing Affordability for Credit Limit Increases:
- Lenders should carry out new checks before increasing a credit limit to ensure it remains affordable.
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Defining Affordability:
- Credit isn’t affordable if repaying it leaves you without enough money for essential expenses, bills, or other debts.
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Signs of Unaffordable Borrowing:
- Relying on further borrowing to make ends meet—such as using a credit card to pay for necessities after making the minimum repayment—indicates the credit is unaffordable.
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Repayment Within a Reasonable Timeframe:
- Repaying only the minimum amount is acceptable for a short time but not over an extended period.
How to Complain
Reasons to Complain
You may have a valid complaint if the lender failed to recognize affordability issues. Consider these situations:
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At the Time of Application:
- Your credit record showed recent problems (e.g., missed payments, defaults, payday loans, mortgage arrears).
- You already had an account with the same lender, where you were only making minimum payments or using it for essential expenses like food or fuel.
- You were close to the limit on other credit cards or had persistent overdraft use.
- Your total borrowing was disproportionately high compared to your income.
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When Your Credit Limit Was Increased:
- Lenders should not increase limits if:
- You’ve only been making minimum payments for a prolonged period.
- You’ve used most of your credit limit for an extended time.
- Gambling transactions appear on your account.
- You’ve missed payments or entered into payment arrangements.
- Your overall debt has significantly increased on your credit report.
- Lenders should not increase limits if:
What You Need to Start Your Complaint
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Details of Credit Limit Increases:
You don’t need specific dates; stating “my limit was increased several times” is sufficient. -
Credit Records:
Your current credit report (e.g., a free TransUnion statutory report) can help demonstrate pre-existing issues, even if you can’t access historical scores. -
Complaints Process:
- Best Method: Submit your complaint via email for a clear record.
- Include your account details, date of birth, and the email address linked to the account.
Template for Complaints
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Start with Account Details:
I want to complain about irresponsible lending by you for my [credit card/catalogue] account [account number]. My date of birth is [dd/mm/yyyy], and the email address I used for this account was [your email].
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Explain Why the Account Was Unaffordable:
You should never have allowed me to open an account with such a large credit limit. When I applied in [year], my credit record would have shown [examples of financial difficulties, e.g., recent defaults, missed payments].
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Highlight Issues with Credit Limit Increases (if applicable):
You should not have increased my credit limit in [year]. At that time, I was [examples: making only minimum payments, using a high percentage of my limit, showing financial problems on my credit record].
By increasing my credit limit, you worsened my financial situation instead of offering help. For example, you could have frozen interest charges.
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Request a Refund:
I would like you to refund all the interest and charges from [specific date or the account opening], and I request that any late payment or default markers be removed from my credit records.
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Request Specific Details:
Please provide the dates and amounts of any credit limit increases in your response.
Points to Consider
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Timing:
Complaints can be made for open, closed, or sold accounts, including those with CCJs. If the account is older than six years, the Financial Ombudsman Service (FOS) may still consider your complaint if you’ve only recently learned about this process. -
Evidence for Old Accounts:
Complaints for issues over six years old may be harder to support, but the FOS can decide whether to investigate. -
Debt Alternatives:
If your financial problems are significant, consider debt solutions like a debt management plan (DMP). Contact National Debtline for advice. -
Refund Expectations:
A refund typically covers interest and fees. If the balance owed is greater than the refund, consider asking if the debt collector can produce a valid Consumer Credit Act agreement for the account, as unenforceable debt cannot be pursued in court.
Responding to Rejections
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Rejections:
Lenders often reject complaints or offer low refunds. If you believe your case is strong, escalate it to the Financial Ombudsman Service after receiving a Final Response or waiting eight weeks. -
Partial Refunds:
If the lender offers a partial refund (e.g., for interest accrued after a credit limit increase), evaluate the offer carefully. If financial difficulty was evident, you may be entitled to a full refund from that point onward.
