A “deeply flawed” motor finance redress scheme seems to be the final nail in the coffin which is leading MotoNovo’s owner, FirstRand, to exit the UK’s motor finance market.
South Africa-based FirstRand said in a stock market update that the UK’s consumer finance sector now will not deliver the returns it requires and the business case to run a consumer finance business here “is not within the group’s risk appetite”.
That means it, together with the board of its UK operation Aldermore Group which MotoNovo is part of, will work to achieve “an orderly ownership transition”.
In its statement, FirstRand said: “The group has consistently shared with all UK regulators its concerns that should the redress scheme result in the level of provisioning that has now transpired, it would be forced to consider whether it can continue to participate in motor finance lending in the UK market on a sustainable basis.
“Given the provision amount facing MotoNovo in meeting the requirements of the redress scheme, the business will require further recapitalisation from the group’s existing available resources in its UK operations. This may mean financial resources available for allocation to motor finance in the UK will be severely constrained, resulting in capital not being available to fund growth in the MotoNovo business. This will have a negative impact for FirstRand’s excess capital position.”
The leadership team at the South African group have slammed the Financial Conduct Authority’s recently announced car loans commission redress scheme as “disproportionate and unfair”. The scheme will cost the industry around £9.1 billion, of which £7.2bn will be compensation.
It said the compensation scheme was “deeply flawed” and goes against the FCA’s own principles concerning fairness and market integrity.
£750m provision outweighs £275m profits
The Finance and Leasing Association has reiterated that the redress scheme must accurately identify and compensate only those customers who suffered genuine loss.
FirstRand’s MotoNovo division was one of the point of sale motor finance lenders battling in a Supreme Court case in 2025. In its case, Johnson v FirstRand Bank, the court ruled Johnson’s relationship was unfair, in breach of the Consumer Credit Act 1974, because of the considerable level of commission the lender MotoNovo paid the car dealer, worth 55% of the total cost of the credit, and because the documents did not disclose the financial position and in fact intended to create the impression that the dealer – identified as Trade Centre Wales at Cardiff in the lower courts – offered a panel of products and recommended one.
This week FirstRand said it has raised its provisions for the redress scheme from the £510 million originally expected to a “considerably larger” £750 million, which it said outweighs the £275 million in profits that was recorded by its motor finance division from more than a decade of lending.
“Whilst the group believes that Aldermore Bank is a resilient and sustainable business serving an important need in the UK market, with a management team that is executing on a sensible strategy to diversify asset classes and funding, extract greater operational leverage and improve the current ROE, the UK as a consumer finance jurisdiction will not deliver the returns the group requires.”
Its statement concluded: “Therefore, the business case for FirstRand to own and operate a UK consumer finance entity, particularly given its disciplined financial resource allocation principles, coupled with the legal and regulatory look-back risk, is not within the group’s risk appetite. Cognisant of protecting shareholder value and ensuring Aldermore’s future success the group will work with the Aldermore board and respective regulators to facilitate an orderly ownership transition.
“FirstRand reiterates its view that the FCA scheme significantly and inappropriately diverges from the SC (Supreme Court) ruling and therefore the group’s legal rights remain reserved.”
Prior to a rebrand in 2012 MotoNovo was known as Carlyle Finance. Its headquarters is in Cardiff.