FCA defends motor finance compensation scheme amid legal challenges
FCA issued update addressing legal challenges to its industry-wide motor finance compensation scheme.
The FCA reaffirmed its commitment to its motor finance compensation scheme despite legal challenges, stating it will defend the scheme robustly. Most lenders have committed to implementation, but litigation introduces uncertainty over scope and timing of redress.
Legal challenges could reshape redress liability estimates, scheme mechanics and consumer outcomes for motor finance lenders.
Action Required
Review motor finance redress provisioning and monitor judicial review outcomes affecting scheme design.
Motor finance redress is a material conduct liability for UK lenders with multi-billion pound exposure.
Maintain elevated provisioning for motor finance redress; monitor litigation and update scenario analyses on scheme outcome variants.
“Following the legal challenges to our motor finance compensation scheme, the FCA is setting out further advice. Priorities remain fair compensation and a healthy motor finance market. The industry-wide scheme will be defended robustly.”