The move by the Treasury to sound out how best to deal with mass compensation claims has been welcomed as a positive step although immediate certainty is critical for car loan providers, according to motor retail tech business iVendi.
As part of her Mansion House speech, Chancellor Rachel Reeves said: “I have heard from many of you that our approach to redress can cause uncertainty and be a drag on investment. The Financial Ombudsman Service (FOS) plays a vital role for consumers to get redress when things have gone wrong and that will not change.
“But reform is needed to create a surer climate for investment, so we have worked closely with the Financial Conduct Authority (FCA) and the Ombudsman to develop a new agreement between the two institutions with clearer expectations on how they co-operate including on historic market practice and mass redress events, and I strongly welcome their joint call for input … which seeks to significantly improve the rules governing how the service operates.”
Commenting on the consultation, which runs until the end of January, Stephen Haddrill, director general of the Finance and Leasing Association (FLA) said: “There is much to be welcomed in the Chancellor’s speech, not least reform of the Financial Ombudsman Service.
“Certainty, clarity and predictability must be the watchwords of financial services regulation for businesses to thrive, for consumers to be protected, and for growth to be realised. The activity of claims management companies, which has choked the complaints system with baseless claims, should also be curtailed.”
iVendi CEO James Tew agrees, insisting that swifter action is now crucial to address current challenges posed by the recent court ruling on commission disclosure.
Noting that the recent court decision has left lenders vulnerable despite their compliance with official guidelines, Tew said: “Future improvements are welcome, but motor finance companies need more certainty right now. The used car sector should proactively defend motor finance, ensuring consumer and lender interests are protected while the commission disclosure landscape is clarified in the coming months.”
He said motor finance played a critical role in affordable vehicle access, pointing out that without it, car ownership would become more costly and restrictive for the many individuals who depend on cars for work, family, and daily needs.
He also noted that products like PCPs (Personal Contract Purchase) help drivers access cleaner, safer, and more reliable vehicles, reinforcing motor finance’s broader social value.
Explicit recognition and a concrete plan addressing the potential mass redress events threatening the sector, was now needed, he said.
As part of this effort, Tew advocated for clear communication of motor finance’s benefits, calling for an industry-wide commitment to transparency through commission disclosure, which he believes will ultimately foster greater competition and market fairness.
“We have links to almost every business in the motor finance sector and almost all are in favour of commission disclosure, both because of the clarity it provides for consumers and to avoid the kind of situation we are seeing at the Court of Appeal.
“Most of these companies also think that, over time, disclosure will lead to greater competition in the market and eventually, both a reduction and general levelling in the commissions paid. While this might mean the price of cars rising slightly as dealers look to retain margin, it again adds to overall transparency.”