The chief executive of the Financial Conduct Authority (FCA) has said the body recognises the record keeping challenge for some firms that could be involved in a potential motor finance redress scheme.
FCA chief executive Nikhil Rathi said that the regulator is focused on “proportionate and workable solutions”.
The FCA previously said it will consult on an industry-wide compensation scheme.
Some concerns had previously been raised over whether consumers or firms would still have the paperwork that may be needed.
In a letter to the House of Lords Financial Services Regulation Committee, FCA chief executive Nikhil Rathi said: “We recognise the record keeping challenge for some firms.
“Since our announcement to consult, we have continued to engage widely – including with lenders, credit brokers, trade bodies, consumer groups, claims management companies, credit reference agencies and professional representatives – to gather initial views and insights.
“We are focused on proportionate and workable solutions to the practical issues that have been raised. The consultation will provide a further opportunity to work through these issues and refine our thinking.”
Responding to a question on what work the FCA has undertaken to model the admin costs of a redress scheme covering agreements dating back to 2007, and how it intends to ensure the costs of a scheme would be proportionate to redress, Mr Rathi said: “Substantial costs will have been incurred already (including for cases going back to 2007) as firms have been processing and investigating complaints during the complaints pause, there have been costs for cases handled through the Financial Ombudsman Service and the many thousands of cases going through the courts.
“There will be significant further administrative and operational costs to implement a scheme.
“Nevertheless, we expect the cost of resolving 2007-2014 cases outside a redress scheme could be very substantial (and quite likely substantially more than a structured redress approach), and this could take significantly more time as potentially hundreds of thousands/millions of cases would then need to be dealt with through the Financial Ombudsman or the courts.
“Our assessment of costs, including for the administration of any redress scheme, will form part of our consultation.”
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
Go to website
ADVERTISEMENT
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
Go to website
ADVERTISEMENT
He continued: “Clear, consistent messaging for consumers is important and, we are keen that all complaints should now be dealt with as promptly as possible.”
Mr Rathi also said that the regulator expects that “a range of lenders will continue offering products on terms similar to those currently available. Other lenders who do not currently offer motor finance products may also consider entry into the market.”
The consultation will launch by early October and if the compensation scheme goes ahead, the first payments should be made in 2026, the regulator said previously.
It has said that many motor finance firms were not complying with rules or the law by not providing customers with relevant information about commission paid by lenders to the car dealers who sold the loans.
The FCA said it will propose rules on how lenders should consistently, efficiently and fairly decide whether someone is owed compensation and how much.
It estimates that most people will probably receive less than £950 in compensation.
