UK Motor finance and the FCA's surprise claims surge

In this episode, Lindsey Rogerson unpacks the details of the potential claims facing UK motor finance lenders. Lloyds Banking Group the UK’s biggest motor finance lender just upped its provisioning to almost £1.2 billion. And they are not happy about it. The problem arises from the Financial Conduct Authority (FCA) 2021 ban on discretionary commission arrangements or DCAs. These were hidden commissions that incentivized car salespeople to achieve a higher interest rate in turn for a bigger commission. The issue here was no one declared this DCA feature to customers. Once the ban was in place, complaints and claims flooded in, which banks promptly rejected causing consumers to pivot to the Financial Ombudsman Service, which was quickly overwhelmed.The banks argue they followed the rules. The FCA says despite the ban only applying in 2021, firms shouldn’t have offered DCAs because they breached the FCA principles and consumer lending rules. It’s not clear cut though. There appears to be a disconnect between case law and regulation that may be addressed in a Supreme Court case coming up next month.LinksFCA most recent (December 19) update for firms on Motor Finance&nbsp;FCA announced investigation into historic sales of motor finance involving discretionary commission arrangements (DCA) and a pause in complaints handling Recording of the February 2024 FCA webinar on its DCA investigation FCA March 2019 report on commission in motor finance sales&nbsp;FCA good and poor outcomes on price and value under the Consumer Duty Decision in the Barclays judicial review of the Financial Ombudsman Service FCA application to intervene in Supreme Court FCA publishes request to intervene in Supreme Court case, defends action over motor finance article Barclays loses judicial review of motor finance case, ombudsman considering next steps article Contact [email protected] www.compliancecorylated.com&nbsp;www.corlytics.com LinkedIn&nbsp;Newsletter signup: <a href="https://www.compliancecorylated.com/this-week-corylated/" rel="noopener noreferrer"...