The FCA has published a letter on the motor finance compensation scheme, responding to the Treasury Committee’s request that it provide an update on the consequences of the legal challenges scheme.
In terms of those consequences, the Committee had asked for information about what the FCA was advising consumers to do, how it expects firms covered by the scheme to deal with complaints, and how the timetable for compensation will be affected by the challenge. They also asked for details around administrative costs and delays as a result of dealing with the challenge, conduct of market participants and how the FCA views its powers as result of the development of this scheme so far.
The FCA’s response runs to 17 pages. Key highlights are as follows:
- Whilst it acknowledges the pain that consumers will face from further delay, FCA states that consumers that have already complained need not do anything at the moment. It further reinforces previous messages about consumers not needing law firms or CMCs to use the scheme, and to think about their position if they are currently signed up with such a firm.
- Unless FCA says otherwise, affected firms should keep preparing for the scheme, but also prepare for a scenario where the scheme does not go ahead; it will work with firms who want to go ahead and pay redress now, so that it can happen in a fair, transparent and consistent way.
- Although there is currently no timetable set for the Tribunal hearing, FCA expects it to be heard before October; in any event, even if the scheme is upheld, payments will not start until 2027.
- Total costs up to March this year of work on the scheme amounts to £20.5m – for further work, FCA observed that this work could start to resemble the PPI exercise.
- Lenders have engaged in a generally constructive way, and 95% of firms affected have submitted implementation plans.
- The regulatory framework in the claims sector is fragmented, raising questions about whether greater alignment or additional powers are needed.