The Financial Conduct Authority (FCA) move to consult on a £18bn redress scheme for consumers relating to historical cases of motor finance over payments has come under intense scrutiny.
Stephen Haddrill, director general of the Finance & Leasing Association, which represents the banks, questioned whether the FCA could get the data and evidence it needed for the payout.
“We have concerns about whether it is possible to have a fair redress scheme that goes back to 2007 when firms have not been required to hold such dated information, and the evidence base will be patchy at best. We will be interested to see how the FCA addresses this point in its consultation.”
Ian Plummer, Autotrader chief commercial officer, said it was good for dealers to have some clarity on the issue following the Supreme Court ruling.
“With such wide-reaching implications, the automotive industry has been waiting with bated breath for the ruling, as have many consumers, and so will be grateful to finally have some clarity on what we hope will be a straightforward administration of the redress.
“It may be some time before we know exactly how the process of disclosing commission will be enacted, but striking the right balance will be key.
Simon Ainsworth, associate managing director at Moody’s Ratings, said the FCA move would hit banks.
“The FCA’s decision to proceed with a consultation for a redress scheme on motor finance commissions is credit negative for UK banks and other consumer credit providers.
“Although the UK Supreme Court’s August 1 judgment narrowed the scope of potential liabilities by stipulating that failing to disclose commissions is unfair and unlawful only under specific conditions, the FCA’s estimated redress cost, ranging from £9bn to £18bn, indicates substantial compensation payouts for lenders.
“To date, these lenders have recognised approximately £2bn, in aggregate, in provisions for motor finance commissions.”