Industry responds to car finance Supreme Court ruling
The automotive industry has called for a swift resolution to the car finance scandal after the FCA said it would launch a compensation scheme in October.
The Supreme Court ruled in favour of lenders on Friday, but the judgement did leave room for smaller payouts in some cases. As a result, the FCA has announced it is consulting on a compensation scheme which could see payouts of up to £950 awarded from next year.
Paul Hollick, chair at the Association of Fleet Professionals, said: “We’ve gone from a situation on Friday where the Supreme Court verdicts suggested the worst risks for the motor finance sector had been removed, to one where the FCA’s intervention has reintroduced the possibility of quite widespread reparations.
“It means we’re going to remain in a situation of considerable uncertainty until the redress scheme is finalised, with that six-week process starting in October.”
Risks
Hollick continued: “The risks for the fleet industry here are twofold. If banks and motor finance companies are forced to pay billions in compensation to consumers, it’ll potentially have a knock-on effect on the availability and cost of finance to fleets. Also, if it becomes more difficult for used car buyers to access finance, it means there could be an impact on residual values, which is also bad news for fleets.
“We’d like to see the whole situation resolved as soon as possible. Yes, consumers whose legal rights have been ignored should be recompensed fairly but the motor finance market also needs to return to normal functioning as soon as possible.”
Pleased
Meanwhile, Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), said: “We are pleased with the Supreme Court’s decision in relation to the FCA’s Motor Finance Review. NFDA provided both written and oral submissions that have helped the Supreme Court reach this verdict.
“As the consumer facing part of the sector, NFDA want to see the regulator act fairly to ensure that UK consumers receive a satisfactory result. Automotive retail accounts for approximately 78% of the broader automotive workforce, we provide a perspective that is at the coal face of dealing with customers.
“As we move forward from this case NFDA will continue to provide support to its members ensuring that the UK has a healthy and functioning motor retail market.”
Welcome relief
Ian Plummer, commercial director, Auto Trader, added: “This ruling will come as a welcome relief to the automotive industry. Most people choose to buy new cars, especially, using finance, and this ruling reduces the likelihood of mass compensation claims, which could have affected lending to the sector.
“It will be some weeks until we have complete clarity on next steps following the ruling, but continuing the process of informed consent, whereby retailers flag the level of commission they’re receiving, is a pragmatic solution, ensuring transparency for millions of buyers, whilst minimising the impact on an industry that contributes billions to our economy.
“And it’s one that has proven successful, with just a tiny number of buyers objecting to disclosed commission, it highlights the perceived value and service retailers are consistently providing.”
