Motor finance redress: what dealers need to know
What’s a Consultation Paper?
It’s important to note how these things work so let’s explain:
The FCA take advice from trade bodies, the legal profession and some firms to help them get together this first version. It doesn’t often move significantly but in the response window of three weeks or so, anyone can send back questions or suggestions and the FCA will consider them and make any changes they feel are appropriate. We will be working with our dealer, broker and lender clients as well as the IMDA and others to put together a robust response that supports our industry.
What is proposed?
What’s covered?
Regulated agreements from 6th Apr 2007 to 1st Nov 2024 where a lender paid broker/dealer commission and disclosure fell short. Consumers who already complained are will automatically be assessed, everyone else will be contacted by lenders to ask if they want to opt in to the scheme by the lenders.
How much will be paid back?
There are two levels:
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Where there was an ‘unfair relationship’ (defined by a winning case in the Supreme Court - ‘Johnson’) lenders will repay total commission plus interest of 8%.
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In all other cases, an average loss will be modelled based on what a usual market rate was compared to the actual rate. Lenders will then pay the difference in the commission back plus a lower interest rate of 1% plus the average of the base rate. This is expected to be an average of £700.
Process & timelines for customers
Lenders will contact eligible customers, issue a provisional decision, give 1 month for response/challenge, then issue a final decision and pay promptly.
What this means for dealers
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Data & records: you may be asked for assistance with records from your current or past lenders. You must assist and do it without delay.
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Handle Complaints: Customers will complain to you and you must handle them properly even if passing on to lenders.
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Protect your future: This won’t be the last time mud is thrown. Keeping accurate records, disclosing properly and handling complaints with evidence will help. We can help!
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Why dealers should care
Even though lenders pay redress and they’re not always your best friend, dealer cooperation affects operation costs, outcomes and ultimately the rates, terms and acceptance levels in future. Do your best now, do better going forward and let’s move on as quickly as we can.
ANY QUESTIONS CONTACT THE COMPLIANCE GUYS