New twists in the FCA’s commission redress scheme

The long-running, multi-billion-pound saga of motor finance commission payments has taken a new twist, just when the finish line appeared to be in sight.

Three finance companies – Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance – and one customer group, Consumer Voice, have challenged the Financial Conduct Authority’s (FCA) redress proposals at the Upper Tribunal.

The legal appeals are unlikely to be heard until October, and while the FCA has said it will defend its scheme ‘robustly’, it has warned lenders “to be operationally and financially ready for a complaint-led and supervisory approach to resolve historic liabilities.”

Consumer Voice says the FCA’s proposed compensation will leave overcharge motorists out of pocket, whereas the lenders claim the current scheme will damage the industry and, ultimately, consumers.

Other banks, including Barclays, Lloyds, Santander and Close Brothers, as well as the Finance & Leasing Association, had decided to accept the FCA scheme.

Meanwhile, the FCA is reviewing the claims management market, amid concerns that consumers are being failed by some claims management companies (CMCs) and law firms.

Finance Connect’s UK Summer Conference on 4 June will have a full briefing on the latest developments surrounding the FCA redress scheme.

The legal challenges come at a pivotal moment for the UK motor industry, as new electric vehicles have become cheaper on average to buy than petrol cars for the first time, according to Autotrader.

Government incentives and manufacturer discounting have steadily narrowed the price gap, while rising petrol prices have pushed annual EV fuel savings to their highest level since records began.

The UK has now registered its 2 millionth electric vehicle, and battery electric cars achieved a 23% market share of new car sales in the first four months of the year. This percentage was well below the 33% required by the Zero Emission Vehicle Mandate, which suggests OEMs will have to sustain their discounting. A sharp increase in registrations of new plug-in hybrid cars, up 47% year-on-year between January and April, points to continued uncertainty among motorists over battery power.

Their confidence has been weakened by policy uncertainty, such as changes to deadlines for ending sales of new petrol and diesel cars and proposals around pay-per-mile taxation for EVs, according to Zenith’s EVXperience Report. It found that almost nine in 10 electric vehicle drivers believe the Government is not doing enough to support the UK’s transition to net zero.  

But industry initiatives are assisting green-minded motorists – Pod and Close Brothers Motor Finance have partnered to offer more than 5,000 dealers access to Pod’s EV charging products and services.

The drivers who are switching to battery power are increasingly likely to look to Chinese brands. The Arval Fleet and Mobility Observatory has reported that 26% of fleets have added vehicles from new market entrants to their company car choice lists.

Fleets are extending their replacement cycles, with data from epyx showing that the average age of a company vehicle entering a workshop is now significantly older than before the pandemic.

This is particularly evident in the van market, where companies are keeping vehicles for longer. Vans sales were down year-on-year for the first four months of the year, with pickups and small vans suffering the worst drops. Year-to-date, electric vans achieved a 9.4% market share, well below the 24% required by the ZEV Mandate, prompting renewed calls from OEMs for greater support and a review of regulatory targets to better reflect market conditions.