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UK Car Finance Probe: Decision Looms
24 Mar
Summary
- FCA decision on UK car finance hidden commissions due Monday.
- Consultation received 1,000 customer responses and industry input.
- Initial compensation plan estimated at £11 billion, now updated.
A pivotal decision on the UK's motor finance redress scheme, addressing hidden commissions charged to car buyers, is scheduled for Monday. Nikhil Rathi, CEO of the Financial Conduct Authority (FCA), confirmed that "fulsome" comments from borrowers and the industry have been received. The FCA's consultation attracted approximately 1,000 customer responses, alongside input from numerous law firms, trade bodies, and banks.
The FCA had extended its consultation in November to allow for more industry feedback on the initial £11 billion compensation proposal. Rathi noted that the feedback was extensive and often conflicting, with further details to be released after market close on March 30. The practice of lenders paying dealers for selling loans ceased in 2021, leading to court rulings culminating in a Supreme Court decision that limited compensation to the most affected customers.
The Treasury had previously expressed concerns that widespread compensation could negatively impact the availability of car loans and the economy. The latest redress program estimates lender compensation at £8.2 billion, with an additional £2.8 billion for implementation, though these figures are subject to change. Several major financial institutions, including Lloyds Banking Group, Mercedes-Benz Group, Bank of Ireland, and Barclays, have already made provisions.
