Overview
The Finance & Leasing Association (FLA) has challenged the Financial Conduct Authority (FCA)’s proposed motor finance consumer redress scheme, arguing the current design would be operationally disproportionate, misaligned with the FCA’s own principles, and could restrict consumers’ access to affordable credit.
FLA’s core concerns
- The scheme, as drafted, cannot deliver the FCA’s guiding principles of fairness, simplicity, finality, efficiency, and certainty.
- Scope is too expansive, risking redress where no unfair relationship or demonstrable loss exists.
- Operational demands (e.g., mass contact requirements) could overwhelm systems and slow payments to valid claimants.
- Higher costs and uncertainty may flow through to pricing and limit future access to credit.
What the FLA wants changed
- Narrow redress to customers who can be shown to have suffered loss from an unfair credit relationship.
- Ensure rules target demonstrable harm and avoid blanket awards.
- Set a realistic implementation timetable to make the scheme operable for lenders and intermediaries.
- Provide clarity on timelines, processes, and decision frameworks to achieve finality and consistency.
Operational pain points flagged
- Requiring firms to trace, contact, and send registered letters to customers who are not owed compensation is described as disproportionate, expensive, and without consumer benefit.
- Expansive evidentiary and compliance steps could divert resources from resolving valid cases promptly.
Alternative methodologies
The FLA says it has proposed alternative, more targeted methods to establish liability and quantify loss, aiming to better align with the FCA’s fairness and efficiency principles. While not publicly detailed here, the approach is framed as evidence-led and focused on actual consumer detriment.
Market and consultation context
- The FCA has been consulting on a scheme addressing past motor finance sales; the consultation deadline was extended to Dec. 12 due to the breadth of issues and stakeholders.
- Industry preparations include new dealer support structures and increased provisions by some lenders, highlighting expected administrative and financial impacts.
- Motor finance transactions are forecast to reach 2.1 million in 2025, underscoring the scale and potential consumer impact.
- Recent signals from the FCA on complaint-handling timelines suggest volumes and processes remain in flux.
Implications
The debate centers on breadth versus precision. A wide scheme could capture more customers but at higher cost and slower delivery; a narrower, evidence-based design may speed redress to valid claimants while preserving market capacity. The FLA favors the latter to protect consumers’ long-term access to finance and to ensure a workable, credible scheme.
What’s next
With consultation responses in, the FCA is weighing submissions. The FLA signals willingness to collaborate on a design that prioritizes swift redress for those who suffered loss, operational feasibility, and clear endpoints to achieve finality.
