FCA: ‘Large number of consumers’ wronged in motor finance deals
The UK’s financial watchdog is gearing up for an industry-wide redress scheme on the historic motor finance scandal where huge swathes of customers could be eligible for compensation.
Nikhil Rathi, chief executive of the Financial Conduct Authority, said there was “evidence that there have been unfair relationships between lenders and their consumers” and that a “large number of consumers were not properly informed” on the details of their deal.
He added the 2007 to near-2020 time frame being used for the redress scheme will cover around “30 million agreements.” but warned not all of those will be eligible for compensation”.
“One of the things that we are looking at very closely is what the scope of the scheme will be,” Rathi said.
Speaking at the Treasury Select Committee, the FCA said its consultation on the industry-wide redress programme will end in early October.
“We hope that compensation, where it is due, can start to be paid next year,” he added.
Firms not playing ball
When pressed on whether firms were pushing back amid the redress, Rathi said there has been a “range of co-operation” across lenders and claim management companies.
Dame Meg Hillier, chair of the Treasury Select Committee, urged the regulator to name any firms “trying to or threatening to delay the compensation”.
Rathi said: “I think you can see firms in the public domain that have raised questions about any redress scheme we put in place”
He added: “Firms can challenge us if we wish to speak publicly about them”.
The watchdog’s chief proposed a private briefing with the committee, in order to avoid publicly naming companies.
Motor finance ruling sends shockwaves
Morning Wire reported last month that the Supreme Court’s ruling on motor finance had sent shockwaves across the finanical services industry with lawyers pulled in to review firms’ exposure.
The Supreme Court gave lenders some relief by accepting two of the three pending appeals.
City banks managed to dodge a £44bn bill, but some uncertainty persists after the top Court found in the case of one claimant there was scope for compensation under the Consumer Duty Act.
The Financial Conduct Authority has said it expects its redress scheme to cost up to £18bn with compensation likely to be around £950 for claimants.
“We expect the average to be hundreds, not thousands,” Rathi said on Tuesday.
The watchdog’s chief reiterated calls for consumers to be weary of claims management company’s (CMC).
It follows Lord Justice Reed striking down CMC’s ahead of the Supreme Court ruling.
Reed said: “Claims management firms have encouraged anyone who bought a car on higher purchase or with a PCP to sign up with them, and no doubt a great many people have done so under the impression that they had a valid claim.
“But it was too early to form any view as to whether a valid claim lay on the basis of the Court of Appeals’ decision, as that decision was under appeal.”