FCA to announce redress scheme

The Financial Conduct Authority (FCA) is planning immediate action on the question of whether or how a redress scheme for compensation for auto finance misselling claims should be put into operation, with the regulator committing to providing a definitive statement on Monday 4 August.

An FCA spokesman said: “We welcome that the Supreme Court has clarified the law and are grateful to the Court for delivering the judgment after the market closed.

“We want to bring greater certainty for consumers, firms and investors as quickly as possible.

“We will be working through the weekend to analyse the judgment and determine our next steps.

“We said we would set out within six weeks whether we would consult on a redress scheme. But we want to provide clarity as quickly as possible.

“So, we will confirm whether we will consult on a redress scheme before markets open on Monday 4 August.

“Our aims remain to ensure that consumers are fairly compensated and that the motor finance market works well, given around 2 million people rely on it every year to buy a car.

“If we do decide to propose a redress scheme, we’ll consult widely. In designing a redress scheme, as we have previously said, we will balance principles including fairness, timeliness, and certainty.”

The Supreme Court’s verdict was given at 16.35 on the afternoon of Friday 1 August, after the financial markets had closed, because of fears of raising the risk of market disorder if the judgment was handed down during trading hours.

In delivering an overview of the court’s decision, Lord Reed said the timing was chosen on the advice of the FCA which said that the outcome, whatever it might be, could affect the price of securities issued by companies involved in the auto finance market, and that the market needed time to digest and consider the implications.

In June, the FCA set out its principles for any redress scheme which would set rules for how firms assess claims and calculate redress, and include putting checks in place to ensure they are following the rules.

The FCA emphasised any scheme would need to be easy for consumers to understand and participate in, without needing to use a claims management company (CMC) or law firm, pointing out that some consumers could end up paying for a service they do not need and facing paying up to 30% of any award in fees.  

At the time, the regulator distinguished between two broad options for any scheme. Under an opt-in redress scheme, customers would have to confirm to their firm by a certain date that they wish to be included. The FCA said this could be challenging, as some consumers may be unsure which firms they had agreements with.

The second alternative is an opt-out redress scheme, whereby customers are automatically included unless they opt out. The FCA said this is likely to be simpler for consumers and could reduce speculative claims. But for firms, it could be more expensive and take longer to implement, particularly if customers have changed address.

AFC/Shoosmiths webcast

Don’t miss your chance to join the AFC/Shoosmiths webcast, sponsored by Odessa, for the first in-depth and independent analysis of the Supreme Court’s landmark ruling on commission disclosure in auto finance.

The 90-minute session begins at 9am on Monday 4^th August and will feature expert insight from leading industry figures and legal professionals. Stay informed with a forensic breakdown of the judgment, its implications for compliance and redress, and what the industry should expect next. Secure your place now by registering here.

Any readers who have questions they would like to put to our panel of experts about the judgment should email edwardpeck@finance-connect.com. All questions need to be submitted by end of day on Sunday.