Partner, Financial Services Advisory
NOTE: This page is based on the regulatory position at the time of writing. We will update this page as new information in relation to the proposed FCA redress scheme is available.
Motor finance lenders will now be implementing the FCA’s Motor Finance redress scheme in line with PS26/3. Firms should already have identified affected customer populations, assessed their exposure, made adequate provisions, and have in place the operational arrangements for implementing the scheme. We now know how the FCA will be checking how the scheme is operated and firms need to consider how they will evidence that they are meeting regulatory requirements, as well as ensuring that their financial reporting is correct. It will be important for the nominated SMF to reassure themselves of all this prior to engaging with the regulator.
We are supporting lenders and firms across all aspects of the Motor Finance Redress scheme. You can find out more about how we can help you further down this page. If you would like to discuss how we can help you or your firm with your specific challenges, please contact one of the authors of this article. Their contact details are listed at the bottom of this page and they will be delighted to discuss how we can help.
The FCA has split redress into two separate schemes and firms must notify the FCA which apply within two weeks of the publication of PS26/3 (i.e. mid-April).
Implementation timeframes differ between the two. Scheme 1 will have an implementation period of 5 months to reflect the greater complexity with older agreements. Scheme 2 will have an implementation period of 3 months – although it is possible to have a single implementation period of 3 months for both schemes.
A second key deadline is 6 weeks from publication of final rules (i.e. mid-May), when the lender must provide to the FCA a Scheme Implementation Plan and delivery forecast.
In-scope agreements include any consumer motor finance agreement, during the relevant time periods, where commission was paid by the lender to the broker where there was inadequate disclosure of commission. These include where any of the following is present:
The starting point for identifying the full scope of customers is efficient access to customer records or possibly other data sources to support compiling complete customer records. These may need to be collated from multiple sources and varying formats. The Motor Finance redress scheme require firms to make ‘all reasonable efforts’ to find information. That can mean using public sources of information to trace customers' current contact details or contacting other parties for information about the motor finance. Where records can be digitised this offers the potential for certain processes to be automated and efficiency gains in handling increased volumes.
You may require specific external support to provide validation over the design and execution of any redress programmes and to provide confidence to internal and external stakeholders about regulatory requirements or programme risks and progress. A programme of this size requires strong governance and oversight to ensure standards are met.
Probable claims presenting contractual or constructive obligations to entities need to be recognised on balance sheet. Judgment needs applying for possible claims, including whether they need disclosing in the notes to the financial statements even if they are not recognised.
