Lloyds, Close Bros and other motor finance lenders face redress scheme, says FCA

The UK financial watchdog has proposed a motor finance redress scheme if an ongoing review finds widespread failings by lenders.

The investigation, which includes a pending Supreme Court decision, will determine whether customers have suffered financial losses.

Major lenders such as Lloyds Banking Group PLC (LSE:LLOY) and Close Brothers Group PLC (LSE:CBG) are among those under scrutiny.

On Tuesday, the Financial Conduct Authority (FCA) confirmed that it is likely to launch a consultation about an industry-wide redress scheme.

The regulator is currently reviewing past discretionary commission arrangements to determine whether firms failed to comply with requirements and if consumers suffered financial loss as a result.

“Under a redress scheme, firms would be responsible for determining whether customers have lost out due to the firm’s failings.

“If they have, firms would need to offer appropriate compensation,” the FCA said, adding that it would set rules for firms to follow and it would put checks in place to make sure they do. 

It said a redress scheme would be “simpler for consumers” than bringing a complaint and would be expected to result in fewer consumers relying on claims management companies and keeping all of any compensation they receive.

Firms should find it “more orderly and efficient” to deal with than complaints.