By William James<\/p>\n
LONDON (Reuters) -Britain’s Financial Conduct Authority (FCA) on Sunday proposed a redress scheme for consumers with motor finance compensation claims following last week’s Supreme Court ruling, estimating the cost at between 9 billion and 18 billion pounds ($12 billion and $24 billion).<\/p>\n
Friday’s court decision had calmed the industry’s worst fears about the size of the bill it would face over improperly disclosed commissions on car loans – a sum analysts had estimated could run to tens of billions of pounds.<\/p>\n
However, after considering that ruling, which was largely seen as a win for the banks, the FCA still proposed an industry-wide redress scheme for certain types of compensation claims.<\/p>\n
“At this stage, we think it is unlikely that the cost of any scheme, including administrative costs, would be materially lower than 9 billion pounds and it could be materially higher,” the FCA said in a statement.<\/p>\n
It said the total cost was hard to estimate. It cautioned that any estimates were indicative and susceptible to change, but it said those in the middle of the 9 billion to 18 billion pounds range were “more plausible.”<\/p>\n
Some level of further compensation payout had still been expected by banks after Friday’s ruling, placing investor focus on the FCA’s decision over whether to launch a full redress scheme, what it might look like, and how much it would cost.<\/p>\n
Lenders, including Lloyds Banking Group, Close Brothers, Barclays and the UK arms of Santander and Bank of Ireland, have already set aside nearly 2 billion pounds between them to cover potential motor finance compensation claims.<\/p>\n
The FCA said firms should now refresh estimates of their liabilities, increase provisions where necessary, and keep markets informed.<\/p>\n
CONSUMER FAIRNESS<\/p>\n
Prior to the Supreme Court ruling, which overturned a previous court decision, there were fears the cost of redress could rival that of a payment protection insurance mis-selling scandal, which cost lenders over 40 billion pounds between 2011 and 2019.<\/p>\n
The proposed motor finance scheme would cover so-called discretionary commission arrangements – those where the broker could adjust the interest rate offered to a customer – if they had not been properly disclosed.<\/p>\n
The regulator said agreements dating back to 2007 should be considered and it would publish a consultation by early October, with an expectation that people start receiving compensation in 2026.<\/p>\n
“Our consultation will cover how firms should assess whether the relationship between the lender and borrower was unfair for the purposes of our scheme,” the statement said.<\/p>\n
“Any redress scheme must be fair to consumers who have lost out and ensure the integrity of the motor finance market, so it works well for future consumers.”<\/p>\n
The consultation will also look at how interest is calculated on compensation, saying it estimated a simple annual rate of around 3% would be applicable.<\/p>\n
The regulator said it had not decided whether the scheme should require customers to opt in, or be automatically involved unless they opt out.<\/p>\n
($1 = 0.7531 pounds)<\/p>\n
(Reporting by William James; Editing by Toby Chopra and Joe Bavier)<\/p>\n","protected":false},"excerpt":{"rendered":"By William James LONDON (Reuters) -Britain’s Financial Conduct Authority (FCA) on Sunday proposed a redress scheme for consumers…\n","protected":false},"author":2,"featured_media":314911,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,4],"tags":[748,114732,114731,393,14637,4884,114729,1144,114730,712,25183,16,15,1764],"class_list":{"0":"post-314910","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-uk","8":"category-united-kingdom","9":"tag-britain","10":"tag-compensation-claims","11":"tag-court-decision","12":"tag-england","13":"tag-financial-conduct-authority","14":"tag-great-britain","15":"tag-motor-finance","16":"tag-northern-ireland","17":"tag-redress","18":"tag-scotland","19":"tag-supreme-court-ruling","20":"tag-uk","21":"tag-united-kingdom","22":"tag-wales"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114965624051838565","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/314910","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=314910"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/314910\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/314911"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=314910"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=314910"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=314910"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}