Posted: 19th January 2024
Motor finance – some practical challenges
The focus of this week has been on the immediate practical challenges arising from the FCA’s recent motor finance commission announcement.
We have been talking to our clients about these challenges, and thought it would be helpful to share them.
General increase in new complaints, enquiries and DSARs
Regardless of whether firms sold motor finance with discretionary commission models, most are seeing a significant increase in incoming enquires, DSARs and complaints. This gives firms resourcing challenges across a number of teams, with more support required to log, respond (to DSARs and enquiries) and triage complaints.
Complaints about discretionary commission
Where firms had discretionary commission models, complaints in relation to this need to be paused. However, to do this effectively, complaints need to be reviewed to determine if:
- The complaint is only about discretionary commission; or
- The complaint is about multiple complaint points, one of which is discretionary commission
- None of the complaint points relate to discretionary commission
Once that review has been undertaken the firm can work out which complaints need to be paused, which should continue as normal, and which complaint points need to be separated out. Where the complaint falls under b) it is necessary to pause the resolution of the discretionary commission complaint point(s), but firms should continue to resolve the remainder of the complaint within regulatory timelines. Practically this means the complaint can be split into two (this has reporting implications) or partially resolved, with the discretionary commission element remaining on pause. The choice of how best to do this may in part be related to firms’ complaint handling systems, and whether they are able to keep the complaint as one and still run two different resolution timelines and issue multiple final response letters. Either way it is important that the customer receives a resolution to their other complaint points within the regulatory timelines, and receives a final response letter with the necessary Financial Ombudsman Service referral rights.
In addition, firms need to create a clear communication strategy for engaging those customers with complaints that are on pause. A good communication strategy will minimise the percentage of customers who proactively contact for an update on their complaint.
The majority of motor finance firms (whether impacted by the discretionary commission issue or not) will likely experience an increase in contact or complaints specifically from CMCs. Where the sale of a customer’s motor finance was not impacted by a discretionary commission model, we have already seen examples of CMCs reorientating complaints to focus on other aspects of motor finance. It is important firms have a clear and consistent CMC policy, and that someone in the firm is responsible for overseeing this policy and CMC liaison. This gives CMCs a point of contact and helps everyone collectively manage their operations efficiently. This CMC policy may need to differ from your usual approach.
Threat to business as usual (BAU)
One of the most significant risks resulting from the increased volume of activity is that it derails BAU activity for non-commission related enquiries and complaints. We would recommend that activity around discretionary commission is managed through a separate project team to ensure consistency of approach, and to enable BAU complaints and DSARs to be dealt with to your usual standard.
We hope this is helpful and if you are looking for advice on any of these areas or additional resources to support this challenge, please contact us.