If motor finance customers have lost out from widespread
failings, we are likely to consult on a redress
scheme
We are currently reviewing the past use of motor finance
discretionary commission arrangements (DCAs). We're seeking to
understand if firms failed to comply with requirements relating
to DCAs and if consumers lost out as a result. If they have, we
want to make sure consumers are appropriately compensated in an
orderly, consistent and efficient way.
Since we launched our review, a ruling by the Court of Appeal has
raised the possibility of widespread liability among motor
finance firms wherever commissions were not properly disclosed to
customers. The Supreme Court will hear an appeal against
the Court of Appeal's judgment on 1 to 3 April. We have been
granted permission to intervene in the case and have filed our
submission with the Court.
We want to provide as much certainty as possible to firms,
consumers and stakeholders. So, we are confirming that if, taking
into account the Supreme Court's decision, we conclude motor
finance customers have lost out from widespread failings by
firms, then it's likely we will consult on an industry-wide
redress scheme. We previously said it is more likely than when we
started our review that we will introduce an alternative way of
dealing with complaints.
Under a redress scheme, firms would be responsible for
determining whether customers have lost out due to the firm's
failings. If they have, firms would need to offer appropriate
compensation. We would set rules firms must follow and put checks
in place to make sure they do.
A redress scheme would be simpler for consumers than bringing a
complaint. We would expect fewer consumers to rely on a claims
management company, meaning they would keep all of any
compensation they receive. It would also be more orderly and
efficient for firms than a complaint led approach, contributing
to a well-functioning market in the future.
Next steps
We are no longer planning a further announcement in May. Instead,
we will confirm within 6 weeks of the Supreme Court's decision if
we are proposing a redress scheme and if so, how we will take it
forward.
The Court of Appeal case involved complaints about discretionary
and non-discretionary commission arrangements (non-DCAs). Our
next steps on non-DCA complaints will also be informed by the
outcome of the Supreme Court case.
Depending on the Supreme Court's decision, we may also consult
separately on changes to our rules.
Throughout our work, we will continue to consider how to make
sure affected consumers are appropriately compensated and the
motor finance market continues to work well, with effective
competition, for the millions of consumers who rely on it every
year.
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