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Motor finance compensation ruling ‘goes too far’, says City regulator
- The City regulator believes that the court of appeal ruling on motor finance compensation scandal goes too far, potentially leading to hefty compensation bills akin to the PPI scandal.
- The Financial Conduct Authority (FCA) disagreed with the court of appeal's decision, particularly in treating motor-dealer brokers as owing fiduciary duties to consumers.
- The ruling could result in a compensation bill estimated at up to £44bn, sparking concerns about impacting various financial products sold on commission, including insurance.
- Car dealerships warned that the ruling risking financial chaos, overriding regulations and introducing uncertainty and instability in the commercial order.
- The National Franchised Dealers Association expressed worries about the novel duty that may create havoc and surprise regulators, potentially leading to financial chaos.
- Roughly 90% of new cars are bought with the help of motor loans where car dealers receive commissions from lenders like Lloyds Banking Group and Santander UK.
- Lawyers for Close Brothers argued that car dealers had little responsibility to act in consumers' financial interests, comparing it to shop workers not obligated to act in the best interest of customers.
- The FCA cautioned against dismissing concerns over bribery in commission payment disclosures, emphasizing the importance of addressing potential exploit gaps in the law.
- Despite law firms criticizing the FCA for siding with lenders, the regulator continues to stress the need to examine the way commission is paid and disclosed to prevent exploitation.
- Darren Smith of Courmacs Legal criticized the FCA for not prioritizing consumers and accused them of protecting lenders who have misled consumers for years, calling for consumer protection and restitution.
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