FCA: Motor finance lenders ‘very focused’ on negatives of redress
The boss of the UK’s financial watchdog has taken a swipe at motor finance lenders that are begrudged with the regulator’s redress scheme, stating they are “very focused” on the negatives.
In a session with the Treasury Select Committee, Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA) opened the door to changing the redress scheme after fierce backlash but urged consumers and lenders to “help us find solution”.
Rathi told MPs the watchdog had received feedback from over 1,000 businesses and consumers on the redress.
The FCA extended the deadline on the consultation to 12 December from 18 November, last month after fierce backlash from all sides.
“While you might say ‘this doesn’t work’, what’s your alternative?,” Rathi stressed.
“And that’s the point I would make both to the consumer law firms but I would also make to the lenders who have been very focused on things they don’t like, but they also need to help us find solutions if that’s the case.”
It echoes a sentiment from Rathi in a previous session, where he said there had been a “range of cooperation” across the scheme.
When pressed on the comment, he said: “I think you can see firms in the public domain that have raised questions about any redress scheme we put in place”
Motor finance lenders raise provisions
Under current proposals from the FCA, lenders are expected to pay £11bn with the scheme covering near 14m eligible agreements, estimated at £700 compensation per deal.
Banks hiked their provisions following the publication of the proposals, with Lloyds Banking Group – which owns the UK’s largest car finance provider Black Horse – raising its reserved cash to £2bn from £1.2bn.
FTSE-250 lender Close Brothers near-doubled its funds set aside to £300m and Barclays almost quadrupled its provisions to £325m.
The boss of Santander UK called for government to weigh in on the saga after pulling the bank’s third-quarter results amid “uncertainty”.
In the session, Rathi said “We see a range of views and where there is good strong evidence that might persuade us to adjust what we have proposed so that we get to a fair, proportionate scheme, we will consider that evidence,” Rathi said.
He added: “One way or another, we have to figure this out”.
Fresh data this week has also shown consumers are prepared to escalate should the FCA’s redress be deemed inadequate.
Figures from Consumer Voice showed almost half of motorists would require at least £2,000 more than the £700 per agreement originally proposed by the watchdog.
A key crux on the row – which centres on ‘secret’ commission agreements between lenders and brokers – covers the FCA’s interpretation of “unfairness” after the Supreme Court sided with the case of one claimant finding his outsized commission fee was “unfair”.
The highest court in the land handed lenders what was dubbed a “luke warm” win after siding with them on two out of three appeals. But the ruling left the door open ajar for the regulator to introduce the industry-wide dress, which has continued to cause contention.