Britain's FCA consults on motor finance complaints extension
Adds quotes, additional detail in paragraphs 2-6, 10
LONDON, Nov 21 (Reuters) -The Financial Conduct Authority is seeking feedback on proposals to give lenders more time to handle complaints on non-discretionary motor finance commissions, after a landmarkruling widened the number of customers they may need to compensate.
Lenders are bracing for the onset of what could become Britain's costliest consumer banking scandal since the faulty sales of payment protection insurance after the Court of Appeal last month said it was unlawful for car dealers to earn either a fixed commission or a discretionary arrangement from lenders on motor finance without obtaining customer consent.
Most cars bought from dealers involve some kind of commission payment, but in order to give informed consent, dealers and lenders were obliged to share details on commission size and how it was to be calculated at the point of sale.
"We want to make sure that consumers who are owed money get it in an orderly way, and that the motor finance market continues to provide competitive deals for the millions of people that rely on it," Nikhil Rathi, FCA Chief Executive said in a statement.
On Wednesday, the UK arm of Spain's Banco Santander SAN.MC, SANS_pa.L set aside 295 million pounds ($373 million) to cover possible costs related to the matter, following rival Lloyds Banking Group LLOY.L who earlier provisioned 450 million pounds.
Ratings agency Moody's this week said the matter could cost the industry as much as 30 billion pounds.
Smaller lender Close Brothers Group CBRO.L also flagged a hit to its 2025 forecast on Thursday but said it had resumed motor finance lending after suspending activities in the wake of the ruling.
The FCA said extending a deadline to provide final responses to motor finance complaints would help lenders handlean expected deluge effectively and to prevent disorderly, or inconsistent, outcomes for consumers and firms.
The first option is until May 31 2025. This reflects how long it may take to hear whether the Supreme Court has granted lenders permission to appeal against the October ruling.
A longer extension until December 4 2025 has also been proposed, to align with the current rules for motor finance firms dealing with discretionary commission complaints.
The FCA banned the payment of fixed commission motor finance agreements in 2021. It said customers who were not satisfied with their car finance deal should complain, and those previously told their agreement did not involve a DCA, may wish to make a fresh complaint.
($1 = 0.7910 pounds)
Reporting By Sinead Cruise; Editing by Amanda Cooper
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