Latest news with #motorfinance
Reuters
5 days ago
- Business
- Reuters
UK Supreme Court to rule on motor finance commissions on August 1
LONDON, July 25 (Reuters) - The United Kingdom's Supreme Court will give its long-awaited ruling on motor finance commissions, which will inform a potentially multi-billion pound consumer redress scheme, on August 1, the court announced on Friday. British lender Close Brothers (CBRO.L), opens new tab and South Africa's FirstRand (FSRJ.J), opens new tab are seeking to overturn a landmark Court of Appeal judgment, which said brokers must have customers' fully informed consent to receive a commission from lenders. Britain's Financial Conduct Authority (FCA) is considering a redress scheme which could leave brokers paying out tens of billions of pounds – and has previously said it will confirm whether to do so within six weeks of the Supreme Court's ruling.
Yahoo
6 days ago
- Automotive
- Yahoo
Six steps firms must take to prepare for potential FCA redress
With a possible FCA-mandated redress scheme on the horizon, motor finance firms must act swiftly and strategically. From data integrity to governance frameworks, this article outlines six critical priorities to help organisations stay ahead of the curve — and avoid costly delays. As the motor finance industry awaits the Supreme Court's judgment on historic commission arrangements, the Financial Conduct Authority (FCA) has indicated that it will confirm within six weeks if it proposes to mandate a consumer redress scheme. Drawing on the FCA's public statements and our internal industry insights, this article outlines six critical priorities motor finance Firms should focus on to ensure that they are institutionally ready for what could be one of the most significant consumer remediation exercises in recent UK financial history. The time to prepare is now. 1. Understand your data sources, gaps, and integrity At the heart of any redress scheme lies data. When a redress scheme is mandated, Firms will need to assess whether customers were harmed by commission arrangements, likely within a pre-defined 'Relevant Period' and, if so, calculate redress accordingly. This requires a deep understanding of historical data - some of which may date back to 2007. Key questions firms should be asking now include: What data points are needed to assess a claim? For example, counterfactual cashflows, commission structures, and customer disclosures Where is this data stored? Is it digital, archived, or in hard copy? Where is it located? Is the data complete and accurate? Are there gaps that need to be filled or inconsistencies that need to be resolved? Can you quickly build a contact list of in-scope customers? This includes verifying addresses and tracing customers who may have moved or passed away. Given the length of time that an FCA remediation scheme has been on the horizon, there is unlikely to be a large amount of sympathy afforded for delays due to data retrieval and cleansing. 2. Redress process design is iterative and takes time Designing a redress process is not a one-off task - it is a dynamic, evolving process. The FCA has indicated that any scheme will be principles-based rather than rooted in a basic counterfactual cashflow review. Meaning that Firms will likely need to tailor their approach to their specific commission models and customer bases. Initial frameworks will almost certainly undergo multiple iterations as Firms and the FCA build a shared understanding of what fair redress looks like. 3. Scope and eligibility: plan for multiple scenarios One of the most challenging aspects of any redress scheme is defining who is in scope and who is eligible. Scope refers to whether a complaint relates to a Relevant Commission Arrangement during the Relevant Period Eligibility considers whether the complainant is entitled to redress (for example, are they the original customer, a legal representative, or a CMC?), and if so, how the scheme might engage with them Firms should develop contingency plans for different scenarios. Also, a robust eligibility filter can help avoid double compensation and ensure consistency. 4. Prepare to design a process map that accommodates split complaints Split complaints - where a single customer has submitted a complaint concerning both in-scope and out-of-scope acts or omissions - pose a unique challenge. Firms should: Define what constitutes a split complaint Design a process map that clearly delineates how such cases will be handled Ensure compliance with DISP (Dispute Resolution: Complaints) rules for regulated products, while developing DISP-adjacent processes for in-scope complaints. 5. Consider a strong project governance framework No redress scheme can succeed without robust governance. This includes: A dedicated Project Management Office to track progress, manage risks, coordinate across functions, and manage resources in a lean and agile way A project board to provide strategic oversight and challenge A complex case committee to handle nuanced or precedent-setting complaints Legal and risk teams experienced in overseeing FCA mandated redress schemes to provide second and third lines of defence Firms should take care in engaging consulting firms to design and deliver a redress scheme. Firms should instead consider the benefit of engaging a law firm to support them in designing, delivering, and risk assure a redress scheme, which will provide all the specialist capabilities required, with the addition of providing an appropriate veil of legal privilege over aspects of the investigation of the complainants, programme design and decision making. 6. Remember, a redress programme is not a change programme A redress scheme is a unique type of programme. The one thing to fix at the forefront of your thinking is that a redress programme is not a change programme. When redress programmes are designed and delivered by change managers, there are three certain risks - the programme will: Overrun Overspend Be overly complicated This approach would be wholly at odds with the FCA published principles of timeliness, simplicity and cost effectiveness. When engaging external expertise, firms should satisfy themselves that they are engaging firms with demonstrated experience in designing and delivering large-scale remediation programmes. Conclusion: readiness is a strategic advantage The FCA has made it clear that it wants to move quickly once the Supreme Court delivers its judgment. Firms that wait for certainty before acting risk being left behind. By focusing now on locating data, data integrity, process design, eligibility criteria, complaint mapping, and governance, motor finance Firms can position themselves not only to comply with a future redress scheme, but to lead it. The road ahead may be uncertain, but the direction is clear. Readiness is no longer optional - it is a strategic imperative. Wayne Gibbard is a Partner at Shoosmiths. Peter Richards-Gaskin leads on Financial Services Disputes, Remediation, and Investigations as a Partner at the firm. "Six steps firms must take to prepare for potential FCA redress" was originally created and published by Motor Finance Online, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Sign in to access your portfolio
Yahoo
22-07-2025
- Automotive
- Yahoo
Four steps to get ready for the Commission Compensation ruling
The impending Supreme Court decision and the Financial Conduct Authority's (FCA) redress scheme are set to reshape the motor finance landscape. The effective management of commission compensation will hinge on exceptional customer service and the streamlined efficiency that only a high degree of automation can provide. Here are four critical steps to help motor finance providers ensure their organisations are ready: 1. Master data ingestion and normalisation The first, and arguably most crucial, step is to gain complete control over historical data. Finance companies face significant hurdles with data completeness and accessibility from years past. Advanced analytics and risk assessment capabilities will, therefore, be critical to help make sense of deep historical data sets. This involves ingesting and normalising vast amounts of historical lending data, including loan agreements, commission records (discretionary/non-discretionary, commission applied/not) and past customer interactions. The goal should be to accurately verify the legitimacy of claims and determine customer eligibility. This includes confirming whether a commission payment was made to the retailer, understanding the loan details, and specifically, the type and amount of commission paid. Not every finance agreement included a commission, and commission rates varied (e.g., lower on new cars than used). By centralising and normalising this data, lenders can more accurately assess potential liabilities and identify specific customer segments most likely to file complaints based on their historical finance agreements and commission structures. This foundational step is paramount to calculating accurate compensation allocations. 2. Automate assignment of correct payout to each claim With a clear understanding of the data, the second step will be to automate the assignment of payouts. The evolving regulatory guidance from the FCA and the eventual Supreme Court decision mean that the precise calculations for redress are currently still fluid. This dynamic environment demands extreme flexibility in operational processes. A powerful business rules management system could play a key part in managing this process. It should empower business teams to implement and rapidly adjust business rules to reflect new regulatory guidelines without heavy reliance on IT or external professional services to make changes to rules and decision strategies. This user-controlled autonomy means that once the FCA clarifies the redress methodology (e.g., whether the payout is the commission paid to the retailer compounded over time), lenders can quickly configure their systems to automate these complex calculations. This automation is vital to efficiently handle the surge in claims that many motor finance providers are already experiencing; and which are likely to increase significantly once the Supreme Court decision is delivered. It should prevent the need for manual, case-by-case reviews and enable accurate allocation of hundreds of millions of pounds in potential payouts. 3. Personalise consumer communications The expected surge in complaints post-ruling will also put immense pressure on customer service teams and inevitably impact customer experience, brand loyalty and potentially increase churn across the whole business, not just those who believe they have a claim. Effective, individualised consumer communication will be key to managing this challenge. Proven customer communication and engagement solutions already developed for the financial services space should be able to facilitate clear, consistent and compliant communication with affected customers across various channels, including voice, SMS, mobile applications, email, social media and other channels. Leveraging strong data analytics, lenders should be able to identify the right channel and the right message for each customer. This is crucial for managing expectations, providing timely updates on redress schemes, and proactively reaching out to eligible customers. If, as expected, the ruling leads to a 404 redress scheme, the onus will be on finance companies to proactively contact affected customers, making automated, two-way communication capabilities essential. By automating mass communications, valuable FTE resources can be re-deployed to focus on more complex cases, rather than being overwhelmed by volume. This focus on a seamless digital experience is paramount to maintaining customer experience and reducing churn. 4. Bolster fraud protection Finally – and perhaps most important – in the context of this issue, is the likelihood of increased fraud risk. The activity around commission compensation will inevitably lead to a rise in fraudulent claims and lenders will need to be equipped to validate legitimate claims and identify suspicious ones effectively. Robust fraud protection capabilities need to be factored into the planning and preparation process. For example, through network and link analysis, connections between seemingly disparate claims could be uncovered, helping to identify organised fraud rings or individuals attempting to submit multiple claims through different channels or identities. This will also help to flag "speculative claims" – those submitted without real basis, perhaps encouraged by Claims Management Companies, differentiating them from genuine grievances. By integrating third-party identity verification services, claimant identities can be verified as legitimate and that they are indeed the individuals who entered into the original finance agreements, preventing claims from stolen or synthetic identities. The motor finance sector is, unquestionably, facing one of the most challenging periods in its history. Yet, as a key component of the UK economy, it is vital that it can continue to support clients and deliver services to keep motorists on the road. Preparing for the volume of claims that many providers have already provisioned for will be critical to achieve this. Andrew Williams is Senior Director, Non-Banking Industries for FICO "Four steps to get ready for the Commission Compensation ruling" was originally created and published by Motor Finance Online, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Sign in to access your portfolio
Bloomberg
09-07-2025
- Business
- Bloomberg
Close Brothers Rejigs Insurance Premium Unit to Boost Returns
Close Brothers Group Plc, one of the lenders most stung by the UK's ongoing motor finance scandal, said it will revamp its premium finance business as part of its plans to boost returns. The company will now focus on commercial lines insurance premium finance, a product that allows businesses to pay their insurance premiums in installments over time, according to a statement on Wednesday. As part of the shift, the company said it is cutting ties with certain brokers that predominantly offer personal lines insurance premium finance, or loans for consumers' motor and home insurance premiums.
Yahoo
04-07-2025
- Automotive
- Yahoo
Secure Trust Bank exits new lending in vehicle finance
UK-based Secure Trust Bank is set to exit new lending in the vehicle finance market, impacting 284 roles by 2030. The move comes as the motor finance industry faces scrutiny over commission disclosure practices in the UK. Secure Trust Bank said its decision is expected to impact its financial results positively. The bank plans to place its existing vehicle finance book, valued at £558.3m ($761.6m) as of December 2024, into run-off. The vehicle finance segment generated a company loss before tax of £21.8m in FY24. On an unaudited pro forma basis, the group anticipates an increase in adjusted profit before tax to £56.6m from £39.1m. Additionally, the group expects an estimated 800 basis points increase in return on average equity (ROAE) before reinvesting the released capital from the motor finance business. Secure Trust Bank said it will continue to support its existing customers and loan portfolio in vehicle finance. As of 30 June 2025, the average consumer loan length outstanding was 37 months, with the longest contractual loan agreement being 60 months. The unit accounted for approximately 30% of the group's adjusted operating costs in FY24, and the bank plans to save more than £25m of operating costs by 2030. Secure Trust Bank stated it would consult with impacted colleagues, with 284 roles at risk by 2030, including 78 roles at risk in FY25. Restructuring costs of approximately £5m are anticipated. Vehicle finance will be reported as a non-core activity in the FY25 results and beyond. A further update will be provided in the group's interim results for the six months ended 30 June 2025, due to release on 14 August 2025. Secure Trust Bank CEO David McCreadie said: 'We have made the difficult decision to stop new lending in vehicle finance, our lowest-return business line, and to redeploy capital to our three higher-returning businesses of retail finance, real estate finance and commercial finance. "This pivot will allow the group to prioritise these established specialist businesses and achieve further simplification of the group, combined with the removal of a significant level of costs. These measures will have a material positive impact on ROAE for the group and will position the group to be capital accretive." According to the Finance and Leasing Association, the consumer new car finance market fell 7% in terms of new business value and 8% in volumes in April 2025 compared to April 2024. However, new business volumes in the new consumer car finance market were up by 11% in the first four months of 2025 compared to the same period in 2024. In contrast, the consumer used car finance market saw a 4% decrease in new business value in April 2025 while volumes grew by 2%. "Secure Trust Bank exits new lending in vehicle finance" was originally created and published by Motor Finance Online, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
