The FCA made one of its regular appearances before the Treasury Select Committee on 9 September. The session focused on motor finance. It updated the Committee that there were around 30 million agreements entered into in the period between 2007 and just after 2020 (a period that will be confirmed in the upcoming consultation) but that not all will be eligible for compensation. As the FCA had previously said, it is carefully considering what the scope of the scheme will be – it thinks there are around 14 million DCAs that will be in scope, and fewer non-discretionary arrangements.
Nikhil Rathi said he could not commit to a precise date for the consultation on the redress scheme, but said the FCA is on track for “early October”.
John Glen raised the question of where the consumer harm actually arose – saying that if consumers were happy with the arrangement and agreed to it, why is it now fair for them to claim compensation? Did the consumers have a duty to ask questions, and if they had done so, would they have got the answers? Nikhil Rathi said firstly that the case was about whether firms had complied with the rules, and noted that in the case that was upheld, the consumer had been told their lending request would go to a panel and they would be offered the best deal, but this was not true so the consumer was misled.
John Glen then asked what the implication of the judgment is for wider financial services, which also up until recently we often based on commission models. Nikhil Rathi replied that the case was about the CCA and the FCA does not see any other significant redress issue on the radar. Mr Glen continued to press on whether consumers who were completely happy would nevertheless get compensation. The FCA said that it is not trying to encourage people to complain – but that that statement did not pre-empt whether it would favour an opt-in or opt-out scheme. The FCA has not decided on this, but did say that even if it goes with an opt-in element, that firms should have some obligations in terms of contacting customers.
Nikhil Rathi said the FCA has so far identified 38 firms that will need to run a scheme.
The Committee tried to press for names of lenders or CMCs that were being difficult, but the FCA refused to divulge any information.
The discussion turned to FCA’s expressed intention to go back to loans from 2007 – which it says it needs to use for several reasons, including that, given that CCA liability goes back to 2007, if the scheme did not cover arrangements from, say, before 2014, the FCA would have to lift the pause on complaints which would mean a flood of complaints to FOS or court actions with less certainty of outcome than the redress cheem would be likely to offer.