Dealerships could gain a clearer view of the timetable for motor finance redress next week when an Upper Tribunal case management hearing is expected to clarify whether the main legal challenges to the multi-million compensation scheme will be heard in December or February 2027.
The scheme which has been designed by the Financial Conduct Authority remains partially suspended following challenges from four parties over its scope, causation of loss, redress methodology and compensatory interest.
Read Motor finance redress: from commission to compensation
The outcome of the October 5-6 Upper Tribunal hearing could help dealers and their lending partners assess the preparation time available, although it is not expected to resolve the challenges themselves.
Advisory firm Broadstone is warning that, even so, waiting for legal certainty could leave lenders facing a compressed implementation timetable.
For dealerships, the potential knock-on effects include requests for historic finance records, help resolving gaps in lenders’ data and customer enquiries about past agreements.
If preparations stall, that work could become concentrated into a shorter period, placing pressure on administration and compliance teams.
Legal timetable shapes preparation
According to Broadstone, next week’s hearing is expected to consider disclosure, expert evidence and wider case management issues.
While the FCA has continues to stress the importance of preparation despite the legal uncertainty, Broadstone pointed to feedback on lenders’ implementation plans identifying further work needed on operational readiness, customer identification, calculations and quality assurance.
Harry Charalambous, principal of credit risk at Broadstone, said: “The Upper Tribunal hearing is an important milestone and should provide greater clarity on the direction and timetable of the legal challenges, but lenders should not consider ongoing uncertainty to be a reason for putting preparations on hold.
“The FCA has been clear that firms still need to maintain momentum, and the practical challenges involved in delivering redress will not disappear if the scheme changes. Historic data gaps, legacy systems, identifying the right customer population and building robust calculation and quality assurance processes all take time to address.”
Although Broadstone’s warning is directed at lenders, those data challenges could extend to dealerships where finance providers need assistance reconstructing historic transactions.
The extent of dealers’ involvement will depend on lenders’ information needs and the final requirements of the scheme once implemented.
Dealer records under pressure
Dealerships that introduced customers to finance providers could be asked to locate information held across older systems or records covering several lending partners.
Charalambous said: “Lenders should therefore be using this period to get the foundations right. Validated data, tested calculation engines, clear audit trails and strong governance frameworks can all be adapted far more quickly to a change in methodology than they can be built from scratch.
“The risk for firms that wait for complete legal certainty is that they find themselves trying to resolve years of data and operational complexity against a much shorter implementation deadline.
“Whatever emerges from the legal process, firms that have done the groundwork now will be in a much stronger position to deliver fair, consistent and defensible customer outcomes when the final requirements are known.”
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