The All-Party Parliamentary Group (APPG) on Fair Banking has published a report on the motor finance commission saga and the FCA’s proposed redress scheme, exploring whether the framework adequately compensates consumers, deters future misconduct and restores confidence in the sector.
The report criticises the FCA’s scheme for being influenced by lenders’ profit margins, resulting in a scheme that favours sector interests over adequately compensating impacting consumers. It also notes that the proposed compensatory interest rate of 2.09% is significantly lower that the 6 – 8% commercial rate offered elsewhere in the judicial system, and that the scheme appears to have overlooked the fact that many vulnerable consumers were harmed by mis-selling practices.
The APPG acknowledges that compensating a large pool of customers is a considerable undertaking, and while the report is on critical on balance, considers the scheme’s coverage period of 6 April 2007 to 1 November 2024 to be pragmatic and fair, and expresses broad support for the three main tests the FCA proposes to use to determine whether a finance agreement is unfair.
Overall, the APPG concludes that the FCA’s proposed redress scheme is not fit for purpose, and falls short of being fair, comprehensive or timely. The report urges the FCA to revisit the scheme to ensure it truly protects consumers’ interests and rebuilds market confidence.