The headline number, published by the Financial Conduct Authority (FCA) after the stock market’s close, was lowered from an originally proposed 11 billion pounds amid pushback during a consultation with the industry
International News via Reuters:
Britain’s motor finance industry must pay 9.1 billion pounds ($12 billion) to compensate consumers for unfair vehicle loans, the markets regulator said on Monday, as it unveiled its final bill for one of Britain’s costliest financial mis-selling scandals.
The headline number, published by the Financial Conduct Authority (FCA) after the stock market’s close, was lowered from an originally proposed 11 billion pounds amid pushback during a consultation with the industry, which includes Lloyds, Close Brothers, Barclays and the finance arms of vehicle manufacturers.
The controversial plan has rattled the industry and tested the mettle of the FCA, which is seeking to draw a line under a 17-year scandal by balancing its duty to protect consumers from harm with government pressure to boost growth and competition by easing the regulatory load.
INADEQUATE DISCLOSURE OF COMMISSIONS, COMMERCIAL TIES
The FCA last October proposed an 11 billion pound scheme, including 2.8 billion in costs, arguing the industry had inadequately disclosed commissions and contractual ties between lenders and car dealerships that it said encouraged brokers to hike vehicle loan rates between 2007 and 2024.
Under a twin plan unveiled on Monday, the FCA said 12.1 million agreements were eligible for redress, fewer than under its original proposals. The average payout was raised to around 830 pounds from 700 pounds per agreement.
The regulator is implementing two schemes – one from April 2007 to March 2014 and one from April 2014 to November 2024. This would help ensure speedy payouts to later motorists if the earlier period is subject to legal challenge, the regulator said.
“Our final approach is fair for consumers and proportionate for firms,” the FCA said, adding: “We have tightened eligibility so only those treated unfairly receive compensation.”
If 75% of eligible consumers make a claim, total redress paid will be 7.5 billion before administrative costs.
Some in the industry had argued the FCA’s methodology for establishing liability was so broad that customers would be compensated who had suffered no loss or unfairness – partly because they said dealerships sometimes used commissions to discount vehicle prices or interest rates on loans.
Some also called for material changes to the plan.
($1 = 0.7583 pounds)
Reporting by Kirstin Ridley and Phoebe Seers; Editing by Tommy Reggiori Wilkes
