FCA ends motor finance complaints pause two months early

The Financial Conduct Authority (FCA) is lifting the pause on the handling of motor finance complaints on 31 May 2026, two months earlier than it originally announced, in a move which has drawn strong criticism from the Finance & Leasing Association (FLA) as being “difficult to understand”, with the regulator stating “it is important that complaints are now dealt with promptly, not least as some consumers have been waiting almost 2 years for an answer”. 

Howard wrote: “We have been clear that complaints cannot be paused indefinitely, particularly in light of the legal clarity we now have regarding motor finance commission arrangements from recent Supreme Court and High Court judgments about the liabilities owed by firms to their customers.”

The FCA draws a distinction between those claims that will be covered by its proposed scheme, which it says will have a broad scope, and those that do not fall within the scope, which include leasing complaints.  It says the number falling out of the currently proposed scheme should be relatively low, and that those who have submitted such complaints should not have to wait longer than necessary.

The decision to cut the pause by eight weeks means that from 5 December 2025, firms must resume progressing these complaints in-line with the requirements in the FCA’s Dispute Resolution: Complaints (DISP) rules.

The letter says this is because complaints about leasing agreements are not subject to the unfair relationship provisions under the Consumer Credit Act and therefore are excluded from any potential redress scheme.

“Accordingly, we do not see a case for continuing the pause for these complaints, and firms must resume handling them in-line with DISP from 5 December 2025,” Howard wrote.

Firms must ensure they are ready to deal with complaints that fall outside any scheme no later than 31 May 2026, from which point firms will have up to 8 weeks to respond to those complaints.

Redress scheme

The FCA has extended the complaints pause for all other relevant motor finance DCA and non-DCA commission complaints until 31 May 2026. The regulator is currently consulting on the details of its proposed redress scheme. This consultation closes on 12 December and the FCA has said it expects to publish the final scheme rules in February or March 2026.

For complaints that fall within the scheme, the 31 May 2026 date will be superseded by the operational timetable in the final scheme rules. For complaints that fall outside the scheme or if there is no scheme, firms will have up to 8 weeks after 31 May 2026 to provide a response. 

Howard wrote: “The revised date balances consumer fairness with the operational requirements for firms to prepare for final rules. Based on the latest point at which we envisage final rules could be published (end March 2026), 31 May 2026 provides a reasonable period necessary for firms to consider the final rules and make informed decisions about complaints that fall inside or outside the scheme.”

The letter urges firms to take action now to deal with complaints which will fall outside the proposed scheme, and also be ready to make redress payments once the scheme is set up. Howard notes that “we welcome the steps some firms have been taking, but we are concerned that some may still be at an early stage”.

The FCA said it will consider how the rules of its proposed scheme interact with the end of the complaint handling pause, to avoid firms having to send final responses that would otherwise be dealt with in the scheme. 

It also intends to set out how firms should respond to complaints involving both scheme and non-scheme elements, recognising that it may be simpler and less confusing for consumers if firms send a final response to any scheme and non-scheme complaints at the same time.

Firms will have to retain and preserve relevant records until 11 April 2031, supporting transparency and ongoing consumer protection in line with the proposed scheme.

Shanika Amarasekara, CEO of the FLA said: “Today’s announcement from the FCA about ending the pause on the handling of motor finance complaints on 31 May, two months earlier than the previously consulted on date of 31 July, is difficult to understand.

 

“This change has created uncertainty for our member firms that have been preparing their operational plans, customer communications, and resourcing on the basis of the original timeline.

“We are seeking urgent clarity from the FCA on the rationale for accelerating the date and on the practical implications for firms that now face significant pressures to adjust processes at short notice. In the policy statement the regulator said that 502 out of 519 consumers supported the July deadline.

“We want to ensure that the eventual redress programme will be workable in practice, capable of identifying and compensating those who have suffered loss and launched with a credible implementation period to ensure it works smoothly.”

The FCA policy statement (PS25/18) covers the complaint handling pause and the steps that lenders and brokers must take as a result.