The Finance and Leasing Association (FLA) has warned that the Finance Conducty Authority’s (FCA) proposed motor finance redress scheme cannot meet its stated goals and is looking for a more targeted and workable approach.
The association has submitted its response to the FCA’s consultation, which officially ended on December 12, with an expected announcement on the shape of the redress scheme before March next yr.
The form of this latest scheme may be subjected to an extra legal challenge before any implementation.
While lenders support a reputable programme for compensating customers who suffered loss from an unfair relationship under the Consumer Credit Act, the FLA said “the scheme as drafted doesn’t deliver fairness, simplicity, finality or operational certainty”.
FLA puts forward alternative approaches for redress scheme
The FLA is urging the FCA to recalibrate the framework so it identifies and compensates only those consumers who suffered actual loss, protects long run access to inexpensive credit and avoids awarding redress where no unfair relationship occurred.
It also argues that any scheme should be deliverable inside realistic timescales.
In keeping with the submission, the FCA’s proposed liability tests “are too broad and risk paying redress to hundreds of thousands of shoppers who neither experienced an unfair relationship nor suffered loss, diverting resources away from those entitled to compensation”.
The FLA has recommend alternative approaches to determining liability and loss, together with recommendations to streamline implementation.
It said current requirements to trace and call customers who will not be owed redress are “disproportionate and add unnecessary cost”.
Shanika Amarasekara, FLA chief executive, said: “Our submission is the product of intensive evaluation by industry practitioners, economists and leading experts from across the motor finance market.
“An important point is straightforward: a redress scheme must provide redress to those that have suffered loss consequently of an unfair credit relationship.
“Where we differ from the FCA’s proposals, it’s since the evidence shows there are fairer, more targeted and more efficient ways to attain that consequence.
“All eyes are actually on the regulator and the industry.
“The most effective result’s one where we work together to deliver redress swiftly to those that need it, protect consumers’ future access to finance, and create a scheme that’s workable and credible for all.”
This Article First Appeared At www.am-online.com
