Industry trade bodies have criticized a proposed remuneration scheme from financial regulators concerning mis-sold financial products, with the Finance Lease Association (FLA) describing it as “completely unrealistic.” Concerns focus on the timeframe for potential relief, which could cover loans dating back to 2007, as both businesses and customers may no longer have relevant records.
Following a Supreme Court ruling that limited the scope of compensation for hidden car loan fees, stock prices for major auto finance lenders soared, with Lloyd’s and Close Brothers increasing by 9% and 20%, respectively. The Financial Conduct Authority (FCA) will begin consultations in October but expects compensation claims to average less than £950 per transaction. Up to 14 million people could be eligible for compensation, according to Martin Lewis from Money Saving Expert.
Stephen Hadrill from the FLA highlighted challenges in determining compensation eligibility due to missing documentation from both companies and customers. FCA head Nikhil Rathi acknowledged the potential for lost claims under these circumstances.
While the Supreme Court indicated that unfair agreements could be subject to claims, Hadrill noted uncertainty over what qualifies as “unfair,” pointing out that more comprehensive guidelines are needed from the FCA. The total cost of the compensation scheme could range from £9 billion to £18 billion.
The financial industry is expected to cover these compensation costs, which might lead to higher loan expenses for consumers. The FCA suggests that customers who believe they have been wronged should directly approach their lenders rather than use claims management companies, which may charge hefty fees for their services.
Despite the Supreme Court ruling mitigating some concerns, the financial landscape remains uncertain, with potential implications for lenders and consumers alike.
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