Carmakers Set Aside Millions as FCA details Car Finance Redress Scheme
london – Major car manufacturers are bracing for ample payouts following a consultation paper released by the Financial Conduct Authority (FCA) regarding a widespread motor finance scandal. The FCA’s proposed redress scheme,outlined in a 360-page document,addresses concerns over commission practices that may have led too customers paying more for car loans than they should have.
The scandal centers on discretionary commission allowances given to car finance brokers, which the FCA believes created an incentive to increase interest rates, potentially resulting in unfair outcomes for borrowers. The consultation is currently being reviewed by consumer groups, lenders, and claims companies, with some raising concerns that the proposals may be challenged in court if deemed unfair. The issue affects millions of customers who took out car finance agreements, and could result in billions of pounds in compensation.
The FLA‘s director of motor finance, Adrian Dally, argued that “Captive finance is there to provide the cheapest option to support the purchase of the manufacturer’s vehicles. That is its function. The FCA’s approach to assessing liability appears too broad to deliver fair outcomes and does not recognize where the customer received a really competitive deal.”
Several carmakers have already begun setting aside funds to cover potential compensation claims. Hyundai capital UK has allocated £34.5m for the motor finance issue in 2024, as revealed in its latest Companies House filings. Honda Finance Europe (HFE) has ringfenced £62.2m, while BMW’s financial arm has provisioned £200m to date.
HFE stated it is “currently working through the consultation paper to understand the next steps” and will “continue to support customers and respond to existing and new queries in due course.” The Guardian attempted to contact Hyundai Capital UK for comment.
