LONDON (Reuters) -Britain’s Financial Conduct Authority (FCA) said on Sunday it was proposing a redress scheme for consumers with motor finance claims following a Supreme Court ruling last week.
“At this stage, we think it is unlikely that the cost of any scheme, including administrative costs would be materially lower than 9 billion pounds and it could be materially higher,” the FCA said in a statement.
The United Kingdom’s top court on Friday ruled car dealers who sold vehicles and arranged the finance did not owe fiduciary duties to customers, and lenders were therefore not liable for the commission.
The decision pushed up U.S.-listed shares of UK banks because it eased investors fears of a redress scheme that some analysts had warned could run into the tens of billions of pounds.
But on Sunday the FCA said that after considering the judgement, it was still proposing a scheme and would consult on what it should look like.
“Our consultation will cover how firms should assess whether the relationship between the lender and borrower was unfair for the purposes,” the statement said.
“Any redress scheme must be fair to consumers who have lost out and ensure the integrity of the motor finance market, so it works well for future consumers.”
The regulator said the proposed scheme would cover so-called discretionary commission arrangements – those where the broker could adjust the interest rate offered to a customer – if they had not been properly disclosed.
The FCA said the total cost to the industry was hard to estimate. It cautioned that any estimates were indicative and susceptible to change, but said estimates in the middle of a 9 billion pound ($12 billion) to 18 billion pound range were “more plausible.”
It said they aimed to publish the consultation by early October and that people should start receiving compensation in 2026.
($1 = 0.7531 pounds)
(Reporting by William James; Editing by Toby Chopra)