FCA Advises Car Loan Providers to Brace for Investigation Costs
FCA Advises Car Loan Providers to Brace for Investigation Costs: The Financial Conduct Authority (FCA) is investigating mis-sold car finance complaints.
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PPI customers who bought a car or van on finance before January 2021 may be eligible for compensation.
City watchdog announced a review of historical commissions and sales. Recently, it wrote to lenders to remind them of the need to maintain adequate financial resources.
To cope with the fallout from its investigation into car loans, the City regulator has warned motor finance providers to conserve cash.
As far back as April 2007, the Financial Conduct Authority announced it was looking at potentially unfair discretionary commission arrangements (DCA) on motor finance deals.
Discretionary commissions on car loans were banned by the regulator in January 2021. It has been speculated that banks and other suppliers of vehicle loans will face significant compensation bills when the FCA finishes its investigation into financing agreed as much as 17 years ago.
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FCA Advises Car Loan Providers to Brace for Investigation Costs
To prepare for the investigation’s costs, Lloyds Bank ring-fenced £450 million for potential customer redress.
Firms are taking “different approaches” to preparing for investigation costs and compensation, according to the FCA.
Lloyds’ Black Horse brand has the most exposure to motor finance, but Santander and Barclays are also at risk.
In September, the FCA plans to outline the next steps in its investigation.
In most cases, companies reject complaints because they believe they have not acted unfairly or caused customers harm. According to the FCA, this could result in an increase in other complaints.
As part of its review of the sector and sales more broadly, the FCA has paused all complaints about motor finance agreements received after 17 November 2023 and before 25 September 2024.
MoneySavingExpert founder Martin Lewis suggested that payouts could be on the scale of PPI redress, which was close to £40 billion in the PPI scandal.
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