The FCA has issued its promised update on the status of the motor finance commission redress scheme.
It doesn’t know when the case for the challenge to the scheme will be heard, but it is unlikely this will be before October.
In the meantime, obviously, firms were supposed to have significantly progressed their remediation exercises by then. So, the FCA says firms should continue to prepare for the scheme until it says otherwise. So they should
- identify relevant complaints and agreements;
- gather the data they need to identify commission arrangements and disclosure practices (including where brokers hold information);
- work with claims companies to resolve situations where customers have more than one claims company acting for them; and
- cooperate with the FOS as appropriate.
The FCA says firms would likely to have to do all this whatever happens.
It also still expects firms to submit their implementation plans by 12 May, but in recognition of the fact those plans may need to be qualified it no longer requires formal attestations by that date as originally planned. And it will be pragmatic about the timetabling for firms communicating with customers.
It will keep everything under review and update firms as appropriate, but for the time being firms should continue progressing complaints completely outside the scheme, and the FCA is considering whether they should progress elements of complaints that are outside the scheme when a complaint is part inside and part outside the scheme scope.
Meanwhile it needs to think about the complaints pause, because this cannot continue indefinitely. It does not know what it would do if the current scheme or parts of it were quashed, but has not ruled out consulting on and implementing an alternative scheme. But lenders, it says, should not assume anything, and would be prepared for a complaint-led and supervisory approach. The FCA knows this will have a significant cost impact on lenders, and an impact on customers who may not always complain.
So, in summary:
- lenders should prepare for a Tribunal decision around November and be ready from then to deal with complaints on a normal basis; and
- lenders should assume no further extension of the complaints pause, and would have to draw on the court judgments when assessing complains, as there would not be any immediate FCA guidance.
The FCA has also summarised the basis for the challenges by the lenders who have challenged it and Consumer Voice, as:
- its power to make the rules, and to identify losses;
- application to pre April 2014 agreements;
- how it has applied the limitation period;
- the rules for determining lender liability including requiring lenders to presume an unfair relationship and that wherever there was an unfair relationship it caused consumers damage;
- how to calculate redress;
- how the FCA has applied its statutory objective of protecting and enhancing the integrity of the UK financial system; and
- alleged unlawful interference with lenders’ property rights under the Human Rights Act.
The FCA says all it can do it advice consumers to complain to their lenders, and should also complain, to the relevant ombusdman if necessary, if they have used a CMC or law firm and are not happy with the fees or the service.