Stay informed with free updates
Simply sign up to the UK financial regulation myFT Digest — delivered directly to your inbox.
The UK financial watchdog has said it is gearing up to launch an industry-wide redress scheme for customers who were mis-sold car finance as it prepares for next month’s landmark Supreme Court case on the sector.
The Financial Conduct Authority said on Tuesday that any redress scheme would require banks to contact customers who have lost out due to “widespread failings” and offer them appropriate compensation, under rules overseen by the watchdog.
The FCA said it would announce its decision on introducing such a scheme within six weeks of a ruling by the Supreme Court on whether secret commissions paid by banks to car dealers for providing car loans were unlawful if customers did not give their informed consent.
The UK’s highest court will hear the case next month and it is expected to announce its decision by this summer. Analysts at HSBC have estimated that the car finance scandal could cost banks as much as £44bn. That would make any redress scheme the biggest of its kind.
“A redress scheme would be simpler than bringing a complaint,” the FCA said, adding that it would also allow fewer customers to turn to a claims management company “meaning they would keep all of any compensation they receive”.
The FCA underlined why a redress scheme was now its favoured approach by adding: “It would also be more orderly and efficient for firms than a complaint-led approach, contributing to a well-functioning market in the future.”
