Motor Finance Redress: An Update on the FCA’s Consultation - regulationtomorrow.com

Timetable: The timeline currently looks like this:

The timeline currently looks like this: Feedback so far: In the meantime, the FCA has indicated that feedback received to date includes the following issues: the time period for the scheme (the proposal is to extend the scheme to agreements from 2007 notwithstanding that FCA took responsibility for consumer credit in 2014, on the basis that the unfair relationship provisions came into force on 6 April 2007 and FOS and the courts can consider complaints back to that point); the rate of compensatory interest (the proposal is for compensation to include simple interest based on the annual average of the daily Bank of England base rate for the relevant year plus 1% and rounded up to the nearest quarter percentage point); how independent mechanisms will ensure confidence, including the role of the Financial Ombudsman Service and ideas for alternative approaches (under the proposal, the FOS would consider complaints against the outcome the consumer should have received under the scheme rather than on the usual basis of what it considers fair and reasonable; consumers could also opt-out and bring court claims instead); how smaller firms or those with a low number of agreements eligible for redress can operate the scheme in a cost-effective way; how to prevent fraud; and what the relationship between motor manufacturers and their captive lenders means for commercial ties, particularly in relation to lending for the purchase of new cars.

In the meantime, the FCA has indicated that feedback received to date includes the following issues: Actions to take now: In light of the above, considerations for firms and senior managers include Responding to the consultation: Firms may wish to consider all the information available to date regarding feedback to the consultation; whether they agree with particular points or not and whether they want to include support or contrary views in their own consultation response. Complaints handling: Firms provided feedback to the FCA on the proposals regarding the complaints handling pause at a time when it was thought that rules would be published in January and the pause would extent to 31 July 2025. The revised timetable may impact this feedback and merit additional engagement with the FCA. Firms should also be gearing up to deal with any complaints for which the pause will expire on 5 December 2025. Redress architecture: Some progress can be made now on developing redress delivery mechanisms, considering what firms need these to deliver and how they will test and get comfortable with particular solutions. However, there are still a number of uncertainties in how the final scheme will emerge from the FCA and the extent to which it may be subject to challenge and so firms need to be prepare to be nimble and keep a close eye on developments. Governance: Like any other significant and complex project, a redress scheme will only be as good as the governance arrangements put in place to support it. It is likely to require input from a range of internal stakeholders who will require a robust and effective framework for decision-making and record-keeping. Governance activities are likely to include: allocating appropriate resources, setting up reporting lines, designing management information, developing a project plan to track actions and milestones; implementing policies and procedures; preparation and verification of reports and attestations. Laying solid foundations now is more likely to set the project up for success and enable the firm, and senior managers, to defend it to the regulator in future if necessary. Read across: For agreements and arrangements outside the scope of the scheme, firms may need to be prepared for ‘complaints by analogy’ where consumers pursue claims for compensation on the basis that they have suffered harm akin to that for which motor finance customers will be compensated. It may be possible to distinguish such claims on the basis of factual or legal differences but considered responses will be required (particularly having regard to the Consumer Duty obligations to achieve the right outcomes for consumers).

In light of the above, considerations for firms and senior managers include

If a discussion on any aspect of motor finance redress would be useful, please get in touch.