House of Lords peers have written to the Financial Conduct Authority (FCA) questioning its decision to go back to 2007 for a potential motor finance redress scheme.
In a letter to FCA CEO Nikhil Rathi, chairman of the Financial Services Regulation Committee, chairman of the Rt Hon. the Lord Forsyth of Drumlean PC Kt, said a better way would be to adopt the timing of the Consumer Credit Act which has a six-year limit.
“Given that the basis of the claims for which any compensation would be payable will primarily be based on a breach of the Consumer Credit Act, the Committee considers that a period which is aligned with the limitation period for bringing a claim in the courts, specified by the Supreme Court, may be more appropriate.
“What legal advice has the FCA taken on this point? What legal grounding underpins the FCA’s proposed timeframe?
The committee also questioned the £9bn to £18bn cost of a potential redress scheme.
“The FCA’s indicative estimate of the scale of redress is particularly important given the impact on the share price of listed lenders and the need for an orderly market.
“What modelling has the FCA undertaken on the indicative cost of a redress scheme with a time frame in line with the six-year limitation period for complaints brought in the courts?”
Finally, the committee noted that the FCA said going back to 2007 would present challenges. It asked the FCA: “What work has the FCA undertaken to model the administrative costs that a redress scheme covering agreements dating back to 2007 would impose on firms, and how does the FCA intend to ensure such costs are proportionate to the amount of redress paid?”
The motor finance commission case has gone through the Court of Appeal, which ruled that motor dealers acting as credit brokers have a duty of loyalty to their customers. The decision paved the bay for billions of pounds to be paid out to customers.
The Supreme Court took a different view in August and the FCA subsequently made a statement on a potential review, the 2007 time limitation and the potential £9-£18bn costing.
Click here to see the committee letter to the FCA