Lords concerned at FCA motor finance redress scheme plans

The House of Lords Financial Services Regulation Committee has written to the FCA setting out a few concerns about the proposed scope of the FCA’s redress scheme in relation to motor finance commissions. Although, of course the FCA has not yet published its full consultation, the Committee is already worried based on what the FCA has said. In particular:

• the FCA has said it thinks the scheme should cover agreements from 2007 onwards so as to be consistent with consumer ability to complain to FOS – but the Committee thinks it would be better to align the timescales with the limitation period for bringing claims under the CCA, given that, in the light of the Supreme Court judgment, breach of the CCA will be the primary basis for the claims. It asks what legal advice the FCA has taken on the point;
• the Committee wants more detail on how the FCA has modelled the likely costing of the scheme and what it would in fact be if the eligibility to claim were in line with the statutory 6 year limitation period;
• the administrative costs on firms of administering compliance with the scheme if it went back to 2007 would be huge, and the Committee wants to know what modelling work the FCA has done on that, and how it would ensure the administrative costs were proportionate to the amount of redress paid; and
• generally, what the FCA has done to affirm its view that it expects a healthy finance market to continue notwithstanding the redress scheme? The Committee wants it to share its modelling, again.

The letter followed a letter from the FCA to the Committee in which it explained its reasoning for the 2007 proposal – broadly that not only is it fair to align the timings with the FOS timescales but that also not to do so could prolong uncertainty in the markets for some time. It says it recognises the difficulties but that it could not decide not to include older agreements simply because it is too difficult to try, or exclude customers from compensation when appropriate records are still available.

The Committee has asked the FCA to appear before it in September to address these questions.