Claims FCA to soften motor redress requirements

There are signs the Financial Conduct Authority (FCA) is back-pedalling on some of its proposals for a motor finance redress scheme, by exempting captive lenders from some compensation claims, requiring lenders to contact only those entitled to compensation, and introducing a longer period before implementation, according to reports in the Financial Times.

The paper quotes sources with knowledge of the regulator’s discussions, which are expected to result in publication of the FCA’s policy statement by the end of March at the latest.

The FCA has previously said it expects the scheme to payout around £8.2bn to consumers which, added to the administration costs of running the programme, means lenders are on the hook for around £11bn.

Of this, the regulator estimates suggest captives would have to pay about half. The FCA has previously indicated that challenges to finance arrangements would be made on the basis that dealers and brokers failed to tell consumers about “tied relationships”. This is an argument that captives have strongly disputed, pointing out that in some cases, particularly with new car purchases, deals were at lower than market average or 0% rates so consumers suffered no harm.

Now the indications are that the regulator plans to exempt captives from having to pay compensation to at least some customers where the key issue was failure to disclose the lender’s link to the dealer, according to the Financial Times.

However, failure to disclosure discretionary commission arrangements, excessive commission payments and the existence of an unfair customer relationship will remain as grounds for claims.

In addition, there is a suggestion that the FCA is likely to bow to industry pressure and allow a longer period of time before lenders must set compensation payments in motion. Originally the consultation indicated this could follow on directly any scheme was mandated.

The regulator is also showing signs that plans to require lenders to contact all customers with finance agreements during the period covered by the scheme may be amended so that lenders need only contact those who are likely to be entitled to compensation.

There is no news about whether the scheme will continue to cover agreements stretching back to 2007, as originally envisaged.

The FCA said in a statement to the FT: “We’re carefully considering feedback and decisions on final scheme rules have not been taken.”