Britain’s financial regulator has extended a deadline for feedback on a proposed compensation scheme for motor finance mis-selling by three weeks after banks, consumers and dealership groups called for more time to analyse reams of market data.
The Financial Conduct Authority has estimated that the scandal will cost lenders about 11 billion pounds ($14.8 billion) if 85% of eligible consumers seek redress, which would make it one of the finance sector’s biggest compensation bills.
Amid criticism from some banks and lawmakers that the scheme is so broad it would compensate consumers who suffered no loss, the FCA delayed the consultation deadline to December 12 from November 18, it said on Wednesday. It expects to publish final rules in February or March.
EXTRA TIME NEEDED FOR ‘ROBUST REDRESS SCHEME’
Shanika Amarasekara, chief executive of the Finance & Leasing Association trade body, said customers deserved “a considered process that leads to a robust redress scheme”.
The FCA said feedback received so far questioned its methodology for calculating redress, the time period for the scheme and the rate of compensatory interest. Questions were also raised over how smaller companies can operate the scheme cost-effectively and how to prevent fraud.
Several lenders have set aside cash to cover the cost of compensation, including Lloyds Banking Group, one of Britain’s biggest players in the motor finance sector. Lloyds has announced provisions of almost 2 billion pounds.
The UK arm of Spain’s Santander last week called for “material changes” to the FCA plan and scrapped publication of its third-quarter results as it seeks clarity on the proposals. The bank, which warned that the scheme could damage credit markets, supply chains, jobs and growth, has pegged its share of the bill at 295 million pounds.
The FCA’s plan seeks to compensate consumers for around 14.2 million motor loan deals that broke laws and regulations between 2007 and 2024 by failing to adequately disclose commission and contractual ties between lenders and car dealerships.
The regulator says the scheme will allow speedy redress for consumers, avoiding lengthy court battles, and provide greater certainty and less disruption for the industry.
More than 2 million people a year take motor finance to buy vehicles in Britain, with 39 billion pounds borrowed in 2024, making it the second-largest consumer credit market.
($1 = 0.7451 pounds)
(Reporting by Kirstin Ridley and Yadarisa Shabong）
