Complaints about car finance commission

We see a range of complaints about car finance agreements, covering things like the sale of the finance, the affordability of the loan, or charges applied. Our page on car finance covers the range of complaints we see. 

This page contains information for financial businesses who are handling and resolving complaints about commission paid by a lender to a car dealer (acting as a credit broker) when arranging a car finance agreement.

It also provides information about the temporary complaint-handling rules, which the Financial Conduct Authority (FCA) introduced on 11 January 2024 relating to certain car finance complaints where a discretionary commission arrangement was in place. And information about the FCA’s recent proposal to extend the timeframe of its complaint-handling rules. 

We see complaints about car finance commission that’s paid by lenders to car dealers (acting as credit brokers) on a range of car finance agreements and different commission models. 

Customers contact us because they believe: 

• the way their car finance agreement was arranged was unfair, or 
• the commission wasn’t properly disclosed and had an impact on how much interest they paid or the type of loan they received. 

They haven’t been able to resolve the complaint with the financial business, and so they come to us to investigate what’s happened. 

When they contact us, people tell us that: 

• they weren’t told the credit broker or intermediary – usually a car dealership – would receive commission from the lender for arranging the finance 
• they think the commission model used by the lender was unfair 
• the advice the credit broker gave them wasn’t impartial because of the commission arrangements between the broker and the lender 
• the credit broker didn’t give the consumer the best interest rate available 

When you receive contact from a customer (including contact that you receive based on or using publicly available templates), you need to consider the type of contact or query and respond appropriately .

You should ensure you have appropriate arrangements in place to correctly identify and explain the commission model(s) used, and the commission amounts paid, in each instance. This is particularly important given the volumes of enquiries you may be receiving. It is important to set this information out when responding to customer complaints, and when replying to our information requests, views and provisional decisions within the time limits set.

Bear in mind that the absence of a discretionary commission arrangement does not in itself mean that the customer has no basis for complaint.

Promptly responding to customer contacts (including customer enquiries and requests for information) and providing clear information and evidence which demonstrates the commission arrangement that was in place, along with the amounts of any commission payments, might help avoid the need for a complaint.

If you don’t reply within the applicable time limits, or the customer disagrees with your response, they can bring their complaint to us. We’ll check it’s something we can deal with, and if it is, we’ll investigate.

FCA’s review of the historical use of motor finance discretionary commission

On 11 January 2024 the financial services regulator, the Financial Conduct Authority (FCA), announced it would be reviewing historical discretionary commission arrangements in the motor finance sector. If it identifies widespread misconduct, and that consumers have lost out as a result, the FCA has said it will consider how best to ensure that consumers receive compensation.

The FCA’s investigation is ongoing. On 30 July 2024, the FCA announced that it will not have completed its review by 24 September 2024 and it needs to extend the temporary complaint-handling rules. The FCA also explained that it would now consult on whether to extend the temporary complaint-handling rules for motor finance complaints until 4 December 2025. The consultation is open until 28 August 2024.

While the FCA conducts its review, it has introduced temporary complaint-handling rules to certain car finance complaints where a discretionary commission arrangement was in place.

It is essential that you continue to investigate and respond to complaints appropriately and promptly in line with the FCA’s revised DISP requirements, and that you continue to cooperate with us where complaints are made to our service, in line with your regulatory obligations.

Complaints that were already logged with us won’t be impacted by the FCA’s investigation and will continue through our process.

FCA’s temporary complaint-handling rules to certain car finance complaints

The FCA’s rules allow:

• businesses to have more time to respond to complaints. Businesses usually have up to 8 weeks to send their final response to complaints, but the FCA has extended this by 37 weeks (so a business may have up to 45 weeks in total).
• consumers to have more time to bring their complaint to us. Usually, consumers will have 6 months from the date on the final response to refer the complaint to us, but the FCA has extended this to 15 months for certain DCA complaints.

The FCA’s rules will apply to complaints where:

• a consumer bought a motor vehicle on finance, for example car, van, campervan or motorbike, before 28 January 2021 (this includes hire purchase agreements such as Personal Contract Purchases)
• the lender and car dealer (acting as credit broker) had a discretionary commission arrangement, and
• the consumer:
  • made a complaint to the car dealer (acting as credit broker) or lender between 17 November 2023 and 25 September 2024, or
  • received a final response to their complaint from the business between 12 July 2023 and 20 November 2024.

The rules won’t apply to complaints if any of the following apply:

• the consumer bought a car using car finance on or after 28 January 2021
• the car was purchased under a hire agreement, such as Personal Contract Hire
• another commission model was in use such as flat fee or fixed rate commission model

If a consumer brings their complaint to us and you haven’t made it clear whether the FCA temporary complaint-handling rules apply, we will ask you to. If you don’t respond promptly, we may begin investigating the complaint and a case fee will be charged. It is important you communicate quickly and clearly to the consumer and us.

You can find more information about the temporary complaint-handling rules on the FCA’s website. 

FCA’s consultation on extending the temporary complaint-handling rules

On 30 July 2024, the FCA opened a consultation on whether to extend the temporary complaint-handling rules for DCA complaints.  This includes extending:

• the pause, which was due to end on 25 September 2024, on the 8 week timeframe which firms are normally required to provide a final response on complaints and give consumers the right to refer their cases to us. It is proposed that this pause will now continue until 4 December 2025
• the timeframe for consumers who receive a final response to bring their complaint to us (which will now run until at least 29 July 2026); and
• extending the requirement for firms to keep consumers informed about the pause and maintain and preserve relevant records (which will remain in place until 11 April 2026).

We will also say more about this and how it might affect complaints after the consultation has closed. 

Complaints about car finance that are not related to commission 

If the complaint is about another issue that doesn’t cover commission but is eligible for extra time under the FCA temporary complaint-handling rules (because a discretionary commission arrangement was in place), we would still encourage you to send your final response as soon as you can. This is so consumers are not waiting longer than necessary to get a resolution to their complaint. 

If the consumer is complaining about another issue where the FCA temporary complaint-handing rules don’t apply, you should continue to investigate the complaint as normal.  

Find out more about how to resolve a complaint. 

As with every case, in reaching a decision about what’s fair and reasonable, we consider relevant:  

• law and regulations 
• regulators’ rules, guidance and standards 
• codes of practice 
• what we consider good industry practice at the relevant time 

If there are disagreements about the facts, we’ll make our decision about what probably happened using evidence provided by you, your customer and relevant third parties.  

Judicial review and other court proceedings

Alongside the FCA’s ongoing review of the historical use of motor finance discretionary commission arrangements, there is ongoing legal action involving complaints about  commission arrangements in motor finance that could have an impact on our work on complaints involving similar issues.

The Court of Appeal heard the appeals in three joined cases at the beginning of July 2024 and we’re waiting to hear on the judgments. We don’t know when we can expect these judgments from the court.

While both the FCA review and court proceedings take place, we’ll continue to accept and investigate complaints. We want to make sure we: 

• have the information we need to decide a complaint as soon as it is appropriate to do so
• can identify whether a complaint is likely to be affected by court proceedings
• can issue investigator provisional assessments, and ombudsman final decisions where appropriate, on cases that are not affected by the legal action

So we will continue to gather information from you and your customers and assess complaints so that we can identify if the complaint is likely to be affected by either or both of the court proceedings.

On unaffected complaints, we expect to issue provisional assessments, and final decisions where appropriate.

It is essential that you continue to investigate and respond to complaints appropriately and promptly in line with the FCA’s revised DISP requirements, and that you continue to cooperate with us where complaints are made to our service, in line with your regulatory obligations.

We will update this page with the latest information and add an announcement to our news section. You can read more about the court proceedings mentioned here in a news update we published in May 2024. 

Complaints relating to car finance where a discretionary commission arrangement was in place  

We’ll expect you to be able to show us that you’ve investigated the complaint thoroughly. This includes providing meaningful responses to consumers, and where appropriate, being clear about the type of commission arrangements that were in place (including whether there was a discretionary commission arrangement) and how much commission was paid. 

Any complaints that are with us (or complaints referred to us after you have sent your final response) we will continue to progress as normal.  We will expect you to cooperate with our investigations in line with the FCA’s complaint-handling rules.  

Once a complaint has been referred to us and we’ve decided it is something we can investigate, we will ask you to provide information about your side of events. When you respond to our request for information and evidence about a car finance commission complaint, you can use our business response form (PDF 258KB) to help you provide the detail we need.

For a complaint about car finance commission, we typically want you to provide the following: 

• Evidence of the amount of commission that was paid by the lender to the car dealer (acting as credit broker) and what commission structure/arrangement was in place. If there were multiple commission payments (or commission models), we will need details of each of these. Supporting evidence could include:
  • invoices,
  • the commission contract documentation between the lender and the broker, and
  • system screenshots.

• Where the commission structure/arrangement was variable in some way, details of how it was variable including providing evidence of the full range of commission payments and interest rates that were available.
• Documentation or other evidence showing what was explained to the consumer about the commission arrangement at the time they took out the finance agreement. This might be:
  • the initial disclosure document (IDD) (or status disclosure document)
  • a demands and needs questionnaire or suitability report
  • the finance agreement and any pre-contract documents
• Details of what work was carried out by the broker in arranging the finance agreement and how this related to the commission that was paid.

If we think you have made a mistake or treated a consumer unfairly, we’ll ask you to put things right. Our general approach is that the customer should be put back in the position they would have been in if the problem hadn't happened. 

The exact details of how we’ll ask you to put things right will depend on the complaint, and how the customer lost out. In some cases, we may also ask you to compensate the customer for any distress or inconvenience they’ve experienced as a result of the problem. 

If you want to talk informally about a complaint you’ve received, you can speak to our Business Support Hub. They give general information on how the Financial Ombudsman might look at a particular complaint. They also offer guidance on our rules and how we work.

Find out how to contact our Business Support Hub.

If you're a consumer looking for information, you can read more about how we can help with complaints about car finance commission.  

And if you want to make a complaint, use our complaint checker to see if your issue is something we can help with.