The Financial Conduct Authority (FCA) has extended the deadline for handling complaints about motor finance commission payments to December 2025, in a move that could lead to one of the largest financial redress schemes in UK history.

This decision follows a Court of Appeal ruling that deemed it unlawful for car dealers to receive commission from lenders without first obtaining the customer's informed consent.

The watchdog’s decision widens the scope of its investigation, covering both motor leasing and motor finance credit agreements. Consumers now have until 29 July 2026, or 15 months from the date of their lender’s final response, to escalate unsatisfactory complaints to the Financial Ombudsman Service, significantly longer than the usual six-month window.

"The Court of Appeal's judgment did not involve motor leasing agreements," the FCA noted. "However, consumers also use leasing to access motor vehicles, and it is important that consumers using similar products for similar purposes are treated in the same way."

The Court of Appeal’s ruling in October sparked a wave of complaints from customers who were not made aware of commission payments. The FCA launched a review into the historical use of discretionary commission arrangements (DCAs), which were banned in 2021. Under these arrangements, car dealers could increase interest rates on motor finance deals to earn higher commissions. The review aims to determine whether there was widespread misconduct and how to compensate affected consumers.

The financial repercussions for the motor finance sector could be enormous. Ratings agency Moody’s estimated that lenders could face compensation claims totalling as much as £30 billion. Last year alone, the UK’s motor finance industry issued loans worth approximately £52 billion.

Stephen Braviner Roman, the FCA’s general counsel, compared the potential scale of the issue to the payment protection insurance (PPI) scandal, which cost UK banks around £50 billion. “Motor finance mis-selling could ultimately have a similar impact,” he said.

The Supreme Court has granted permission for lenders, including Close Brothers and MotoNovo owner FirstRand, to appeal the Court of Appeal's ruling. A hearing is expected by April 2025, with a decision anticipated by next summer or autumn. Meanwhile, the FCA has stated that firms must comply with existing laws when arranging new motor finance agreements.

In the interim, the FCA aims to ensure an orderly, consistent, and efficient process for addressing complaints. A spokesperson added, “We are committed to ensuring affected consumers receive appropriate compensation while maintaining effective competition in the market.”

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