The Financial Conduct Authority has appointed a third-party independent expert to consult with car loans firms as the regulator progresses its review of historic discretionary commission arrangements.
A sample of motor finance firms have been contacted already, the FCA said, and it wants the skilled expert it has appointed to review them rapidly but thoroughly to identify whether there has been a risk of consumer harm by historic discretionary commission agreements provided to car dealers by their motor finance partners.
It saw the need for this review as lenders are generally rejecting complaints received about historic discretionary commission arrangements, although the Financial Ombudsman has now upheld two cases where the car buyer was not aware the broker could influence the size of the commission they would earn from introducing the buyer to a car loan firm.
The regulator needs to know whether these commission arrangements “resulted in financial loss to consumers”, said Claire MacArthur, manager for market intervention at the FCA. It also wants to assess whether any issues identified were “widespread” in motor retail.
She said the review may need to expand its sample, and it would inform firms by April if this was the case.
She was at pains to state it “is not a done deal” that the review will find widespread harm.
James Tallack, FCA technical specialist, redress and CMC policy, emphasised that there is no view as yet about which party would be liable for any such loss.
The probe is reviewing arrangements from April 6, 2007 – the point at which the Ombudsman gained oversight – until 2021 when the FCA banned discretionary commission due to its potential to harm consumers.
Asked about regulated firms that may have destroyed ancient records, the FCA’s Costas Pittas, head of market intervention, reminded firms that its CONC rules state to hold records for as long as legally necessary, but where firms no longer have records he would expect them to communicate in detail with their complainants.