Britain’s Financial Conduct Authority (FCA) will update the market on March 30 about a multi-billion pound redress package for millions of consumers affected by mis-sold motor finance, the regulator’s chief executive said on Tuesday.
Nikhil Rathi told a parliamentary committee that the FCA would set out its approach to one of the country’s most expensive mis-selling scandals shortly after markets close.
The FCA last October proposed an 11 billion pound ($14.74 billion) compensation package, accusing the industry of inadequately disclosing commissions paid by lenders to motor dealerships and other commercial ties that it said encouraged brokers to charge more for car loans between 2007 and 2024.
The proposals have drawn sharp criticism from both industry and some consumer groups.
Some in the industry, which includes the likes of Lloyds, Santander, Close Brothers, Barclays and the finance arms of car manufacturers, have warned the FCA could face time-consuming legal challenges unless it recasts its proposals, industry sources have told Reuters.
The sources said the FCA’s redress methodology included a broader-than-expected definition of what constitutes an unfair loan and a lower-than-expected bar for “excessive” commissions.
Rathi has said the regulator, under pressure from Britain’s Labour government to support economic growth by easing the regulatory burden on the finance industry, could adjust and refine plans if it sees convincing, evidence-based feedback during a consultation.
In the meantime, some in the industry have hiked financial provisions, with Lloyds putting aside almost 2.0 billion pounds.
Close Brothers, accused this month by short seller Viceroy Research of misrepresenting its exposure to the redress payments, has said it would cut a fifth of its workforce by 2027.
The specialist lender, whose stock plunged more than 10%, said it “strongly disagrees” with the short seller’s report.
