As the FCA continues its investigation into Discretionary Commission Arrangements (DCAs), with next steps announced in May 2025, a recent ruling has just tipped the scales even further in consumers' favour.
FCA proposed approach (copied from PS24-11)
On the 25th October, the Court of Appeal found the use of ‘undisclosed commission’ cases in motor finance to be unlawful. This landmark ruling will inevitably influence the regulator's decision on DCAs, potentially setting the stage for a large-scale redress.
In this post, we’ll cover the essential steps motor finance firms should take now to prepare for potential regulatory outcomes. From handling rising complaint volumes to assessing data integrity and planning remediation, we’ll outline proactive strategies to help firms mitigate risk and maintain operational resilience.
Immediate actions for motor finance businesses
Based on Jaywing’s extensive experience working with some of the UK’s leading financial services organisations, including on similar remediation programmes, we recommend businesses should begin preparations now and adopt a two-pronged approach: addressing immediate needs first, whilst also laying the groundwork for actions required when the outcomes of the FCA investigation are finalised.
Here’s how you can prepare:
Complaints surge handling
With a second surge in complaints expected, the immediate challenge is for firms to ensure they have scalable processes in place. Effective complaints handling, including managing Data Subject Access Requests (DSARs), will require robust categorisation, workload management, and high standards of customer communication throughout each resolution.
Firms with more sophisticated tools and technology can enter the complaints onto their systems and confirm eligibility by merging to historic customer databases, employing matching algorithms where required. The less technologically advanced may have to establish more manual labour-intensive processes.
Impact assessment
Conducting a comprehensive review of your motor finance portfolio will help identify eligible customers and assess the financial impact of potential redress actions. This is not a process to be underestimated, it will be onerous and complex. There may also be a requirement in the interim, depending on internal governance requirements, to calculate an initial estimate of potential financial outcomes. Any assessment will need to be demonstrably robust and validated to satisfy regulatory and any internal requirements.
Data investigation
Assessing data quality is essential for calculating redress accurately. Given the likely eligibility period dating back to 2007, many lenders will face challenges due to system migrations and data fragmentation. While key details, like agreed interest rates, are usually available, determining what the rate should have been without the DCA may require conservative assumptions in favour of the customer.
In our experience, where there is uncertainty around the data, the redress calculation must resort to conservative assumptions that benefit the affected customer. Further data challenges such as dealing with changes in customer addresses, deceased customers and debt sales cause additional complexity.
Remediation planning
Preparing for a redress programme typically requires specialist expertise and additional head count within operations, legal, finance, risk, IT, all supported by effective programme management and appropriate overarching governance protocols. Early planning for a remediation programme will enable your firm to quantify resource requirements and then arrange and assign roles and responsibilities across your internal teams with external parties engaged early to secure any supplementary resources.
DCA redress: Looking ahead
Given the expected complexity of the likely action required, businesses should be using the time between now and then to understand their own position and be prepared for a possible directive to follow from the FCA.
The way that businesses address this, and the speed at which they are able to do so, will make a huge difference financially, operationally and reputationally. Where there are optimised processes in place at the earliest opportunity, remediation costs can be managed.
If businesses want to act fast, they should consider partnering with experts covering data management, regulatory compliance, credit risk analytics, legal guidance, and ideally experience of similar prior remediation programmes.
Such collaborations can provide the necessary depth of expertise and experience to navigate the intricacies of the remediation process effectively, ensuring compliance, safeguarding consumer interests, and reinforcing their commitment to ethical business practices.
Jaywing’s track record–marked by intricate projects spanning risk and finance with the likes of Virgin Money, HSBC, Starling Bank, Secure Trust Bank and Skipton Building Society–positions us as an ideal partner to undertake this critical evaluation. Contact us today to find out more.