A formal redress scheme could be brought in by the UK’s financial watchdog for people who may have been overcharged for motor finance commission.
The Financial Conduct Authority (FCA) launched a review of historical use of motor finance discretionary commission arrangements and sales across several firms in January.
Since then, it has said some companies are almost certainly guilty of commission failings, and finance firms such as Close Brothers and Lloyds Banking Group have been putting aside hundreds of millions of pounds in case they have to fork out.
Now Parliament’s treasury committee, which has been looking into the work of the FCA, has been told by the watchdog that a formal redress scheme is a distinct possibility.
Any such scheme would see motor finance firms that overcharged people forced to pay them damages.
‘It’s one of the options based on the evidence that we receive,’ FCA CEO Nikhil Rathi was reported by Reuters as telling the committee.
He added that the FCA was closely examining complaints about motor finance as well as court rulings, and that it was requesting data from firms, with this stage of the process lasting until September.
‘We will then take a view as to what further action may be needed,’ he stated.
But he repeated the warning given in March about some firms almost certainly being guilty of failings, saying: ‘I think it’s unlikely from our work that we’re going to find nothing to report.’
However, he added that he didn’t want the committee to think that it would reach the level of the banks’ misselling of payment protection insurance.
That scandal was among the country’s costliest and ended up with lenders having to fork out some £38bn in damages.
Rathi said it was necessary to ensure the UK still had a motor finance market that worked, since 78% of households owned a car.
