Motor Finance Complaints: How to Prepare Before the May 31 Deadline

On May 31, 2026, the FCA's pause on the eight-week complaint handling deadline for motor finance commission complaints expires. For the motor finance industry, this date marks the end of a breathing space and the beginning of what could become the most significant consumer redress exercise the UK has seen since payment protection insurance. The firms that have used the pause period to prepare will manage. The firms that have not will face a convergence of operational, financial, and regulatory pressure that is difficult to overstate.

This is not a theoretical risk. The Supreme Court's ruling, the FCA's response, and the volume of complaints already lodged create a set of circumstances where unpreparedness is not merely embarrassing but potentially existential for smaller firms. This guide sets out what happened, what happens next, and precisely what compliance teams at affected firms should be doing in the weeks remaining before the deadline.

Background: How We Got Here

The story begins with the Supreme Court's October 2024 decision in Johnson v FirstRand Bank Ltd (t/a MotoNovo Finance) and the joined cases of Wrench v FirstRand and Hopcraft v Close Brothers. The Court ruled that motor finance brokers owe a fiduciary-like duty to consumers, requiring them to disclose any commission received from the lender and to obtain the consumer's informed consent to that commission. Crucially, the Court found that this duty applied regardless of whether the commission arrangement was a discretionary commission arrangement (DCA) or a fixed commission model.

The judgment went further than many in the industry expected. While the FCA had already banned DCAs from January 2021, recognising that they created inherent conflicts of interest by allowing brokers to increase their commission by raising the consumer's interest rate, the Supreme Court's ruling extended the duty of disclosure to all commission models. This meant that historical motor finance transactions going back years could potentially give rise to valid complaints, even where the commission was fixed and non-discretionary.

The FCA responded in November 2024 by imposing a pause on the eight-week complaint handling period prescribed under DISP 1.6, effectively freezing the clock on motor finance commission complaints to give the industry time to prepare for the anticipated volume. The regulator simultaneously launched a consultation on whether a broader redress scheme might be necessary, similar to the approach taken with PPI.

That pause lifts on May 31, 2026. From that date, the normal DISP timeframes apply, and firms must handle motor finance commission complaints within eight weeks or face the prospect of complaints being referred to the Financial Ombudsman Service (FOS).

Who Is Affected

The scope of affected firms is broader than many realise. It is not limited to the lenders who provided the finance.

Motor dealers and intermediaries are directly in the firing line. Most motor dealers act as credit brokers, introducing consumers to lenders and receiving commission for doing so. Under the Supreme Court's ruling, these dealers owed a duty to disclose that commission and obtain informed consent. For dealers who did not do so, and the industry norm for many years was minimal or no disclosure, historic transactions represent a significant complaint exposure.

Motor finance lenders face exposure both directly, through complaints about the finance agreements themselves, and indirectly through responsibility for the conduct of the brokers in their distribution networks. The FCA has been clear that lenders cannot simply point to their broker agreements and disclaim responsibility for broker conduct. Under the Consumer Duty, firms in the distribution chain share responsibility for consumer outcomes.

Finance brokers and aggregators who arranged motor finance as part of a broader brokerage business are also within scope. Any firm that received commission from a motor finance lender in connection with arranging a consumer credit agreement is potentially exposed.

Claims management companies (CMCs) are already actively generating complaint volumes. The FCA's CMC register shows significant activity in motor finance complaints, and the marketing campaigns being run by CMCs suggest that complaint volumes will be substantial once the pause lifts.

What Happens on May 31

When the pause lifts, the practical consequences are immediate.

First, all motor finance commission complaints that have been lodged during the pause period become subject to the standard eight-week handling timeline under DISP 1.6. Firms must issue final response letters within eight weeks of the pause lifting for complaints received during the pause, or within eight weeks of receipt for new complaints. Failure to meet this deadline gives the complainant an automatic right to escalate to the FOS.

Second, the FOS will begin accepting referrals of motor finance commission complaints. The FOS has been preparing for this and has indicated that it expects significant volumes. The FOS's approach to these complaints will establish important precedents for redress calculations, and firms need to monitor early FOS decisions closely to calibrate their own complaint handling and redress approaches.

Third, the FCA will be monitoring firms' complaint handling performance in real time. The regulator has been explicit that it expects firms to have used the pause period to prepare, and firms that demonstrate inadequate complaint handling capacity, excessive delays, or poor outcomes for consumers will attract immediate supervisory attention.

The Preparation Checklist

The following checklist represents the minimum standard of preparation that the FCA expects affected firms to have completed before May 31. Firms that cannot answer "yes" to each of these items should treat the gap as an urgent priority.

Complaint Handling Capacity

The single most common point of failure in large-scale complaint exercises is insufficient capacity to handle the volume within regulatory timeframes. Firms must make a realistic assessment of expected complaint volumes and ensure they have the people, processes, and systems to handle them.

Assess your exposure. Calculate the number of motor finance transactions your firm arranged or originated during the relevant period. Apply a complaint conversion rate. The FCA has not published an official estimate of expected complaint rates, but industry modelling suggests that firms should plan for complaint rates of between 5 and 20 per cent of affected transactions, depending on the nature of the commission arrangements and the extent of CMC activity in their customer base.

Scale your complaint handling team. For firms expecting complaint volumes in the thousands, existing complaint handling teams will not be sufficient. Recruit and train additional complaint handlers now. Do not wait until May 31 to discover that you cannot meet the eight-week deadline. Temporary staff, outsourced complaint handling, or a combination of both may be necessary. Whichever approach you choose, ensure that handlers are trained on the specific regulatory and legal issues relevant to motor finance commission complaints, not just generic complaint handling procedures.

Update your complaint management system. Your systems must be able to track motor finance commission complaints as a distinct category, capture the data fields required for the new REP-CRIM consolidated complaints reporting (effective July 1, 2026), and generate the MI that your board and senior management will need to oversee the exercise. If your current system cannot do this, upgrade or configure it now.

Redress Framework and Provisioning

Complaint handling without a clear redress framework is complaint handling without a destination. Firms must have a defined methodology for calculating redress before the first complaint is upheld.

Develop your redress calculation methodology. The appropriate redress will depend on the specific commission arrangement, the consumer's financial loss, and the counterfactual position (what would have happened if the commission had been properly disclosed and consented to). For DCA complaints, the calculation is relatively straightforward: the consumer should be restored to the position they would have been in had the interest rate not been inflated by the discretionary commission. For non-DCA complaints, the calculation is more nuanced and may depend on whether the consumer would have proceeded with the same product had the commission been disclosed.

Provision for redress costs. Firms must make financial provisions for expected redress costs. For listed companies and firms subject to audit, accounting standards require provisions to be recognised when an outflow is probable and can be reliably estimated. Even for smaller firms, the prudential implications of a significant redress liability must be understood and managed. If your firm's redress exposure threatens its capital adequacy, engage with the FCA's supervisory team proactively and early.

Engage your auditors and actuaries. For firms with material redress exposure, the financial provisioning exercise will require actuarial input on expected complaint volumes, uphold rates, and average redress amounts. Engage these advisors now rather than waiting for the first complaint to arrive.

Management Information and Board Oversight

The FCA expects boards to be actively overseeing the motor finance complaint exercise. This means regular, granular MI reporting, not quarterly summaries.

Establish a dedicated MI dashboard. At minimum, your board should receive weekly MI on complaint volumes received, complaints in progress, complaints resolved, average handling time, uphold rates, average redress paid, total redress paid to date, and complaints approaching the eight-week deadline. The MI should also flag any complaints where the firm's response is likely to differ from the FOS's expected approach, as these represent potential escalation risks.

Appoint a senior manager with explicit accountability. Under SM&CR, there must be a named individual with responsibility for the firm's motor finance complaint handling exercise. This individual should have sufficient authority to make decisions on redress, allocate resources, and escalate to the board when necessary. The FCA's expectations around prescribed responsibility for complaint handling (SYSC 6.3) are well-established, and the motor finance exercise will test whether firms' SM&CR allocations are genuine or notional.

DISP Compliance

The FCA's Dispute Resolution Sourcebook (DISP) sets out detailed requirements for complaint handling that firms must follow. In the context of motor finance complaints, several DISP requirements deserve particular attention.

Final response letters. Every complaint must receive a final response letter within eight weeks. The letter must explain the firm's decision, the basis for that decision, any redress offered, and the complainant's right to refer the complaint to the FOS if they are dissatisfied. Template letters that do not address the specific circumstances of the individual complaint will not meet DISP requirements and may themselves become the basis for further complaints or FOS referrals.

Record keeping. DISP 1.9 requires firms to retain records of complaints and their outcomes for a minimum of three years. For motor finance commission complaints, given the potential for subsequent litigation, the FCA's review, or FOS referral, firms should retain records for significantly longer. Establish a clear retention policy for motor finance complaint files and ensure it is communicated to all complaint handlers.

Root cause analysis. DISP 1.3.3R requires firms to analyse complaints to identify root causes and take reasonable steps to address those causes. For motor finance commission complaints, the root cause analysis should inform the firm's broader assessment of its historical commission practices and whether proactive outreach to affected consumers (beyond those who have complained) may be appropriate or necessary.

Consumer Duty Implications

The Consumer Duty, specifically the cross-cutting rule requiring firms to act to deliver good outcomes for retail customers, applies directly to how firms handle motor finance complaints. The FCA has been explicit that complaint handling itself is a consumer touchpoint that must meet Consumer Duty standards.

This means that complaint handling processes must be designed to deliver fair outcomes, not to minimise redress costs. Firms that design their complaint handling to create barriers to complaining, that use complex or legalistic language in response letters, or that systematically offer lower redress than the firm's own analysis suggests is fair are likely to attract supervisory and enforcement attention.

The Consumer Duty also requires firms to consider the needs of vulnerable customers in their complaint handling processes. Motor finance complaints may disproportionately affect consumers in vulnerable circumstances, and firms must ensure their processes can identify and appropriately support these consumers.

Common Mistakes to Avoid

Based on our experience supporting firms through previous large-scale complaint exercises, including PPI, interest rate hedging products, and packaged bank accounts, the following mistakes are the most frequently observed and the most damaging.

Underestimating volumes. Every firm we have ever worked with on a large-scale complaint exercise initially underestimated complaint volumes. Plan for the upper end of your estimate, not the midpoint. Scaling up is always harder and more expensive than scaling down.

Treating it as a one-off project. Motor finance complaints will not arrive in a single wave and then stop. CMC activity, media coverage, and word-of-mouth will sustain complaint volumes for months or years. Your operational planning must account for sustained activity, not a single peak.

Failing to coordinate across the distribution chain. Complaints about a single motor finance transaction may be directed at the dealer, the lender, or both. Firms within the same distribution chain must coordinate their complaint handling approaches to ensure consistent outcomes. Inconsistency between a lender's and a dealer's response to the same complaint is a guaranteed route to FOS referral and FCA scrutiny.

Ignoring the data reporting obligation. The new REP-CRIM consolidated complaints reporting framework takes effect on July 1, 2026, barely a month after the motor finance complaint pause lifts. Firms must ensure their motor finance complaint data is captured in a format that meets the new reporting requirements from day one. Retrofitting data capture after the event is expensive and error-prone.

Timeline of Key Dates

How MEMA Can Help

MEMA Consultants has direct experience supporting firms through every major consumer redress exercise of the past decade. We understand the operational, financial, and regulatory pressures that motor finance firms are facing, and we provide practical, hands-on support that goes beyond generic compliance advice.

Our motor finance complaint readiness services include:

• Operational readiness assessments evaluating your complaint handling capacity, redress framework, and MI against FCA expectations
• Redress methodology design developing a defensible, consistent approach to calculating and paying redress
• Complaint handler training ensuring your team understands the regulatory, legal, and Consumer Duty dimensions of motor finance commission complaints
• Board reporting frameworks designing the MI dashboards and governance arrangements your board needs to oversee the exercise effectively
• FCA engagement support helping firms that need to communicate proactively with the regulator about their complaint exposure and remediation plans

The May 31 deadline is five weeks away. If your firm has not yet completed its preparation, the time to act is now, not on June 1 when the first batch of complaints arrives and the clock starts ticking.

Book a consultation with our regulatory advisory team to discuss your firm's readiness and get a practical assessment of where you stand.

---

For broader context on the FCA's 2026 enforcement and supervisory priorities, read our companion article on FCA Compliance Priorities for 2026 or explore our Compliance Services.