FCA reveals motor finance redress plan

The Chief Executive of the Finance & Leasing Association, Shanika Amarasekara, has responded to the Financial Conduct Authority’s publication of its final motor finance redress scheme yesterday evening, which sets out how firms must identify unfair relationships and calculate compensation for affected customers.

According to the FCA, around 12.1 million agreements are in scope, with total redress of around £7.5 billion if most eligible consumers claim, and average compensation of more than £800 for each agreement. Industry attention will now turn to how well the scheme will work in practice and how quickly customers will expect to receive compensation

Shanika Amarasekara said, “What we wanted to see was a responsible, workable announcement that genuinely draws a line under the commissions issue, restores regulatory certainty, and protects the future investability of the sector so that competitively priced motor finance remains available for customers in the years ahead.

“While the FCA has clearly endeavoured to make the redress scheme more proportionate than the proposed scheme consulted on in October, it will take time for us to assess the market impact of the measures announced today.

“We have always been clear that where consumers suffered loss, redress must be paid. But any redress scheme for a market of this size must accurately identify and compensate only those customers who genuinely suffered loss.

“If it is drawn too broadly so that it also compensates customers who suffered no loss, the only real winners will be Claimant Law Firms and Claims Management Companies – and that cannot be the regulator’s intention considering that it has today had to launch a multi-organisational taskforce in an attempt to address the conduct of claimant firms operating in the motor finance market.”

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