On 11th January, the FCA announced plans to issue S166 Requirement Notices to several motor finance firms over historical sales practices.

The notice raised new concerns over discretionary commission agreements, which were banned in 2021, as the regulator felt they ‘give motor finance brokers/dealers an incentive to raise customers’ finance costs’.

As a result of two recent adjudications by the Financial Ombudsman Service (FOS) that found firms have been rejecting almost all complaints, the FCA is expecting a significant increase in the volume of complaints in this area.

In response, the FCA now intends to conduct a full review of complaint handling and is expected to:

  • Issue S166s (under powers granted by the Financial Services and Markets Act 2000) to a number of motor finance providers
  • Suspend the eight-week rule for responding to relevant motor finance complaints
  • Consider next steps for providing compensation if deemed necessary


Discretionary commission agreements: what firms need to know

The key message from the FCA’s commentary is around differences in firm and customer perspectives on discretionary commission arrangements. This is reminiscent of the regulatory work conducted around payment protection insurance (PPI), which turned into a major initiative for the regulator – whilst it’s not possible to accurately size this right now, the emerging consensus is that it could be similar in size and cost to PPI.

However, this does give us a clear idea as to where the FCA may decide to take this initiative, and we encourage firms to assess their potential exposure and begin preparations as early as possible.

Indeed, though we won’t know the extent of the work required until the regulator’s review is completed, motor finance providers could be looking at a full redress scheme involving every affected customer – or alternatively, formula-based redress arrangements involving calculations and compensation for complainants.

Needless to say, it’s time for the motor finance firms to take a closer look at their frameworks and practices, and to assess the size of the potential impact of the regulator’s fresh focus on the industry.


Act now: independent impartial advice from TCC regulatory specialists

If you’re likely to be affected by the FCA’s upcoming motor finance initiatives, we’re here to help. Our team of subject matter experts and experienced advisers can provide an objective, independent second opinion on where you stand and your obligations to consumers.

We have a long, successful track record in supporting firms on regulatory issues – plus our teams have a range of hands-on skills developed in previous positions at ‘Big 4’ firms, the regulator, and relevant senior roles across industry sectors.

Our range of services includes:

  • Section 166 reports: We bring a practitioner’s view that’s focused on the right outcome for your firm, your customers and the FCA – we’ve helped a number of firms (large and small) in recent years.
  • Constructive and meaningful analysis: We review your current position and steps needed to reduce your risk exposure.
  • Expert support for risk and issues management: Our regulatory experts have the experience and skill sets to collaborate with you and assist your internal teams and/or manage activities where beneficial. We can offer input at any stage of an initiative to review and address any risks or issues you have.
  • Remediation: Should you need to carry out a remediation programme, we have an experienced Managed Services team able to provide exactly the level of support you’re looking for – we offer anything from individual customer assessments to Quality Assurance (QA) and full programme outsourcing (in partnership with you, of course).
  • Skilled calculation team: We have a ‘ready to go’ skilled team that has worked across remediation programmes at scale – including areas such as PPI, pension switching and DB transfers – and have a well-honed calculation and QA model to get the job done quickly and cost-effectively.


We’re certain that this issue will evolve quickly as the FCA plans further communications in Q3. However, motor finance firms should brace for a lot of background work between now and then.

And so, there’s no time to waste. Impacted motor finance businesses should be adding this new regulatory topic to top of their agenda – because when it comes to tackling these types of review challenges, we always advise to take early action.


Benefit from a complimentary fact-finding session with TCC experts

TCC offers an initial discovery session to discuss your intended approach and offer our help in any way we can – with a particular focus on our S166 and remediation programme experience.

Even if you’re not taking customer action now, getting ahead of the curve with population identification, customer records and impact planning can only help to make things smoother as the project gathers steam.


Book your complimentary discovery session now – simply use the form below and our team will be in contact to discuss next steps and arrange the fact-finding session for you (and your colleagues).