The Finance & Leasing Association (FLA) will be reiterating to the Financial Conduct Authority (FCA) industry concerns that the remedies in the Motor Finance Redress consultation are so broad that they will compensate customers who suffered no loss – effectively ignoring the requirement for proportionality on the part of the regulator and therefore impacting growth and competition in the motor finance sector.
Appearing yesterday at the House of Lords Financial Regulation Committee, Nikhil Rathi, CEO of the FCA, accepted that this is a consultation process and that the FCA would listen to views received in response to the consultation, but rejected any suggestion that the proposed methodology for the redress scheme would need to be recalibrated.
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Members of the House of Lords Financial Regulation Committee were incredulous about the fact that 44% of all motor finance agreements made since 2007 will be considered unfair according to the proposed redress scheme, questioning if it was a failure of regulation.
Shanika Amarasekara, CEO of the FLA, said: “Motor finance underpins the UK’s mobility and productivity. Getting this scheme right matters – not only to remedy past issues, but to safeguard consumers’ access to affordable credit for the future.
“I appreciate that the regulator has a job to do, but so too have the legal, economic and compliance experts who have reviewed the proposals and found them to be wide of the mark if efficiency and proportionality were the objectives.
“The FCA assumes that inadequate disclosure of a discretionary arrangement (DCA) is tantamount to an unfair relationship, for which redress should be paid. But many DCA customers suffered no loss whatsoever.
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By GlobalData“A consultation of this size, complexity and economic importance would ordinarily run for three months, yet this one is being completed in just six weeks. The onus is now on the FCA to listen carefully to industry evidence – because a badly designed remedy risks creating new problems rather than resolving old ones.
“The FLA and its members will continue to work with the FCA, Parliament, and other stakeholders to ensure redress is fair, proportionate, and sustainable.”
