THE Financial Conduct Authority (FCA) has issued a major update in the car finance compensation scandal.
In a statement today, it said it will confirm whether customers could get redress within six weeks of a Supreme Court decision.
The FCA has issued a major update on the car finance scandal[/caption]
Should a redress scheme go ahead, it could see those who bought a car, motorbike or van on finance before January 28, 2021 owed thousands of pounds.
The compensation case affects specifically those who were overcharged when they took out a loan to buy a vehicle.
Dealerships were incentivised to push customers towards pricier finance deals through what are called Discretionary Commission Arrangements (DCAs).
A Court of Appeal ruling in October last year found that a broker could not lawfully receive commission from the lender without obtaining the customer’s fully informed consent to the payment.
The Court’s decision has been applead by car finance firms Close Brothers and Motonovo.
The Supreme Court, a higher court, is now considering the appeal.
The FCA will then confirm within six weeks of the decision of that appeal whether a consultation on a redress scheme will go ahead.
If it decides one will go ahead, it will set out the timings of that consultation.
Whether a redress scheme is put in place will be decided following the consultation.
The specific “final rules” of the scheme would also be set out including when redress is expected to be paid.
The FCA estimates this will in 2026.
It has also now confirmed how that redress scheme might be shaped, including seven “principles”.
These include fairness, certainty, timeliness and transparency.
Darren Richards, head of Broadstone’s Insurance, Regulatory and Risk Advisory division, said: “The update this morning from the FCA sets out some of the key decisions it is grappling with when it comes to implementing a redress scheme to deal with motor finance compensation.
“It is clear that the decisions behind the design of a redress scheme are complex and need to balance fairness for consumers and the integrity of the motor finance market.
“The message is that clear that preparation should continue – but executing redress will require consultation and there is a waiting game until the FCA concludes this process and provides details of the redress scheme.”
