(Bloomberg) — The UK’s Financial Conduct Authority said it’s now considering implementing a redress scheme that banks would have to follow if they discover consumers were harmed by historic practices in their motor finance businesses.
The regulator had previously said it hoped to introduce an alternative way of dealing with complaints tied to the saga, but it now believes a redress scheme would be simpler for consumers looking to bring forward a complaint, according to a statement Tuesday.
The regulator’s ultimate decision on the matter depends on a case that will be heard before the country’s Supreme Court in April. The FCA had previously said it would make a further announcement in May about its next steps on its ongoing review of whether auto loan borrowers were overcharged but it now plans to make its next announcement within six weeks of the Supreme Court’s decision.
“Under a redress scheme, firms would be responsible for determining whether customers have lost out due to the firm’s failings,” the FCA said in the statement. “If they have, firms would need to offer appropriate compensation. We would set rules firms must follow and put checks in place to make sure they do.”
FirstRand Ltd. and Close Brothers Group Plc are the two firms at the center of the lawsuits before the UK’s top court. They are appealing a lower tribunal’s decision that deemed it unlawful for lenders to pay car dealers a commission to sell their loans to motorists without their consent.
The court cases have captured the attention of investors around the world and lenders across the UK are bracing to pay out potentially billions in claims should judges rule against the two companies. Analysts at Bank of America Corp. recently estimated that the industry may face as much as £38 billion ($49 billion) in costs tied to the saga.
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