BDO comments on motor finance redress scheme

Commenting on the details of the FCA’s motor finance redress scheme announced today, Richard Barnwell, a financial services advisory partner at BDO said.

“There still remains a sizeable gap between the Financial Conduct Authority (FCA) and Claims Management Companies (CMCs) over the potential amounts of customer redress due for motor finance commission failures.

“The final rules, published by the FCA, maintain average redress to be £829 per claim and a total redress bill for lenders of about £9bn. CMCs are claiming it should be almost double at £1,500 per claim. It’s estimated around a third of potential claimants are signed up with CMCs, leading to a potentially higher redress bill of about £12.4bn in our view.

“The FCA have not changed much of the fundamentals of the redress scheme. The population of customers in scope has been tweaked to reduce the estimated number likely to receive redress at 12.1 million. This is down from previous FCA estimates of 14.2 million. However, for lenders with pre-2014 books of business, redress figures look likely to be higher than the average because of the way redress will be calculated.”

ENDS

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