Key facts
- The FCA is 'very concerned' about motor finance lenders' readiness for a £9bn redress scheme.
- Letters sent to over 100 firms indicate plans are insufficient for timely and accurate redress payments.
- A roundtable is scheduled between the FCA and lenders to discuss the scheme.
- The scheme addresses 'secret' commissions that obscured costs for consumers.
- Mercedes-Benz has provisioned £400m, while Volkswagen has not yet made provisions.
The Financial Conduct Authority (FCA) has expressed significant concern over the preparedness of motor finance lenders to implement a £9bn redress scheme. In letters sent to over 100 firms, the City watchdog stated it is "very concerned" about many companies' operational readiness to handle complaints, noting that a substantial number of plans are not yet capable of supporting timely and accurate redress payments.
Motor finance lenders are expected to attend a roundtable discussion with the FCA this week to address the ongoing row surrounding the redress program. The scheme, which concerns the use of 'secret' commissions that left consumers uninformed about the full cost of their finance, could see city lenders like Lloyds, Santander, and Barclays liable for up to £9bn.
While the Supreme Court previously offered a partial win to the industry, it left the door open for a redress scheme. Mercedes-Benz has already set aside £400m for the issue, whereas Volkswagen has yet to make any provisions. Consumer campaign group Consumer Voice, represented by Courmacs Legal, is also challenging the redress scheme. The FCA has pledged to "defend [the scheme] robustly" at the Upper Tribunal, emphasizing that preparation is necessary regardless of legal uncertainty. The regulator highlighted concerns about the industry's reliance on underdeveloped systems and insufficient oversight of third-party or automated processes. Toby Hall, director of scheme supervision at the FCA, urged firms to continue preparing for all scenarios to ensure complaints are handled consistently, efficiently, and fairly.