Motor finance FCA firms face a fresh warning after the Financial Conduct Authority told more than 100 providers many are not ready to handle a £9bn compensation scheme. The regulator wants complaints and redress processed accurately, but says current plans leave too many firms short of the standard consumers and markets need.
“We are very concerned about many firms' operational readiness to handle complaints,” the Financial Conduct Authority said in correspondence sent last Friday. It added: “A significant number of plans are not yet capable of supporting timely and accurate redress payments.”
Toby Hall on readiness
Toby Hall, director of scheme supervision at the FCA, said: “While there is ongoing legal uncertainty, firms should continue preparing for all scenarios. Consumers and markets need confidence that, whatever the outcome, complaints will be handled consistently, efficiently and fairly.”
That message lands before this week’s roundtable with motor finance providers. The FCA also said scheme implementation plans should comprehensively set out how firms will comply with their obligations under the rules, and that the plans reviewed so far are not sufficient for many firms.
£830 average payment
£830 is the average the FCA says eligible claimants will receive, although individual payments will vary and some customers will get more while others will get less. The programme could cost as much as £9bn, with city lenders including Lloyds, Santander and Barclays facing the biggest liabilities.
The scheme sits over secret commission arrangements that kept consumers uninformed. Last year, the Supreme Court gave the industry a tepid victory but left the door open to redress, and at the end of March the definitive proposals were published.
Good practice examples
More than 100 companies were written to because the FCA is worried about underdeveloped systems and processes, plus weak oversight of third-party and automated procedures. The regulator said it will release examples of good and poor practice in the coming weeks, a move that should give firms a tighter operational benchmark before payments begin.
Mercedes-Benz, Crédit Agricole Auto Finance and Volkswagen have opposed the definitive proposals, while Consumer Voice is challenging the scheme through Courmacs Legal. The FCA says it will defend the scheme robustly at the Upper Tribunal, leaving firms with a practical choice: keep rebuilding internal controls now, or risk being behind when the rules bite.
