The Financial Conduct Authority (FCA) has confirmed that it is “likely to consult on a redress scheme” if its ongoing review finds that motor finance customers have lost out due to “widespread failings” by firms. The regulator is currently reviewing past discretionary commission arrangements (DCAs) to determine whether firms failed to comply with requirements and if consumers suffered financial loss as a result.
Since launching its review, the FCA has noted that “a ruling by the Court of Appeal has raised the possibility of widespread liability among motor finance firms wherever commissions were not properly disclosed to customers.” The Supreme Court is set to hear an appeal on this case from April 1 to 3, and the FCA has “been granted permission to intervene in the case and have filed our submission with the Court.”
“We want to provide as much certainty as possible to firms, consumers and stakeholders,” the FCA stated. “So, we are confirming that if, taking into account the Supreme Court’s decision, we conclude motor finance customers have lost out from widespread failings by firms, then it’s likely we will consult on an industry-wide redress scheme.”
Under such a scheme, “firms would be responsible for determining whether customers have lost out due to the firm’s failings. If they have, firms would need to offer appropriate compensation. We would set rules firms must follow and put checks in place to make sure they do.” The FCA added that this approach “would be simpler for consumers than bringing a complaint” and would likely reduce reliance on claims management companies, allowing affected customers to retain their full compensation.
The FCA has confirmed it is “no longer planning a further announcement in May.” Instead, it will “confirm within 6 weeks of the Supreme Court’s decision if we are proposing a redress scheme and if so, how we will take it forward.” It also stated that its next steps on non-DCA complaints will be “informed by the outcome of the Supreme Court case” and that, depending on the ruling, it “may also consult separately on changes to our rules.”
The regulator reiterated that “throughout our work, we will continue to consider how to make sure affected consumers are appropriately compensated and the motor finance market continues to work well, with effective competition, for the millions of consumers who rely on it every year.”
