The UK’s motor industry is awaiting the outcome this month of April’s Supreme Court case concerning car loans commission and dealers’ responsibility to customers, but firms have been urged to prepare.
At the recent Finance and Leasing Association Insight25 event, experts from law firm Addleshaw Goddard advised that firms must not waste time ahead of the judgement.
Firms should be working already to understand their customer cohorts, and what the customer journey has been, particularly looking at commission disclosures, said Claire Hughes, Addleshaw Goddard’s consumer credit partner.
Mapping for potential liabilities will help firms be able to understand their position once the Supreme Court judgement lands.
“What is really clear is that the FCA is going to do what the FCA is going to do irrespective of anything that comes out of the Supreme Court,” Hughes said. Firms need to be thinking how they can prepare themselves for any FCA redress scheme.
“For me, part of that is really digging into your data. Understand the data that you do have, and what is within the realms of possibility.” Knowing what the extent of data still held, whether that goes back to 2007, will position firms to engage meaningfully with the FCA’s consultation when it comes.
Lenders, dealers and brokers can also be thinking know about how they will communicate with their past customers. Amid a climate of online and telephone fraud, they need to be considering how they will engage with past customers, said Sarah Thomas, Addleshaw Goddard’s partner specialising in regulatory interventions and redress.
Thomas (pictured) said the motor finance industry needs to help the FCA determine its redress scheme by coming forward with data and evidence that helps the regulator design its scheme. Factors could include its scope, how far back claims could go, how difficult it might be to reach former customers, how redress could be calculated, the resources potentially required. “My worst case scenario for all this is that it becomes incredibly manual,” she added.
The FCA has openly said that it must ensure the motor finance market is healthy and competitive for the future as well as supporting consumers who are due redress for firms’ past failings. The motor finance industry is hoping for a sensible, proportionate scheme.
But the risk is huge. Last year the FCA’s top legal expert warned this has the potential to be the motor industry’s equivalent of the £50bn PPI mis-selling scandal.
The regulator was already looking at historic discretionary commission arrangement (DCA) issues raised by Financial Ombudsman Service rulings when a Court of Appeal judgement left the industry reeling with a decision which could make thousands of past motor finance agreements unlawful.
Last month the FCA set out some of the factors it will consider if it launches a UK-wide consumer redress scheme as part of its review into car loans commission, and said it will confirm within six weeks of the outcome of the Supreme Court case whether it does plan to introduce a redress scheme and it will then consult with industry on its detailed plans.