Chancellor Rachel Reeves has intervened in the motor finance commission case in a bid to protect banks and finance houses from paying out hundreds of millions of pounds in compensation to consumers.
The FT reported that the Treasury is seeking permission to intervene in the Supreme Court arguing that the case had the “potential to cause considerable economic harm and could impact the availability and cost of motor finance for consumers”, said the FT.
It warned the case could damage Britain’s reputation as a place to do business, the report said. The warning comes amid a giant lobbying effort by big business to put a stop to the compensation hand out.
Santander has been widely reported to be running the rule over the future of its UK business and profitability in the face of increasing regulation. Other businesses have also warned more red tape is damaging to business sentiment.
The Guardian reported Kuba Fast, the chief executive of JP Morgan’s online retail bank Chase UK, saying “Where this creates a lot of challenge, is when you say: ‘look, as an industry participant, I’ve been doing everything to to a T, and I’ve been doing everything the way I was told to do. Now I’m being penalised.
“It does not create a predictable business environment and it does make it quite difficult to operate [in the UK].”
The Financial Conduct Authority (FCA) extended the time motor finance houses have to handle complaints relating to motor finance commission.
The proposed extension would allow firms more time to handle complaints efficiently and effectively and help prevent disorderly, inconsistent and inefficient outcomes for consumers and firms.
The FCA is seeking feedback on proposals to extend the time firms have to respond to motor finance complaints where a non-discretionary commission arrangement was involved.
The regulator previously extended the time firms have to respond to motor finance complaints involving a discretionary commission arrangement (DCA).
The FCA’s consultation follows the Court of Appeal’s 25 October judgment in Hopcraft v Close Brothers Ltd, Johnson v FirstRand Bank Ltd, and Wrench v FirstRand Bank Ltd.
In these cases, the Court decided it was unlawful for the car dealers to receive a commission from lenders providing motor finance without first telling the customer about the commission and getting their informed consent to the payment.
To obtain informed consent, the borrowers would have to have been told all material facts that might have affected their decision to enter into the agreements, which, in these cases, included how much the commission would be and how it was to be calculated. The judgment related to fixed commission motor finance agreements as well as DCAs, which the FCA banned in 2021. The 2 lenders involved in the cases intend to appeal.
