(Bloomberg) -- The UK’s Financial Conduct Authority said it’s “more likely” to intervene over motor finance practices, an early indicator that firms including Lloyds Banking Group Plc, Close Brothers Group Plc and Barclays Plc may have to compensate customers over the sale of car loans.
“It is too early to say if we will intervene in this way, but based on our work so far, it is more likely than when we started our review,” the FCA said in a statement Tuesday.
The comment came as the watchdog announced an extension to its probe as it grapples with delays in receiving data and awaits the outcome of a legal challenge from Barclays. The regulator said it now intends to set out the next steps of the review in May 2025.
The extra time will in part help give the regulator enough time to consider ways of compensating consumers, according to the statement.
The FCA in January said it was aware that auto lenders were facing a deluge of complaints from consumers alleging their auto loans were priced in a way that treated them unfairly. At that time, the regulator paused a requirement that firms respond to these complaints within eight weeks and promised to outline next steps by September.
Provisions
Lloyds, the biggest provider of car finance, set aside £450 million ($570 million) earlier this year to pay for possible compensation and other costs linked to the FCA’s ongoing probe. Close Brothers, where one-fifth of the loan book is dedicated to motor finance, has said it won’t pay any dividends for the 2024 financial year as it looks to strengthen its balance sheet while the review continues.
Barclays opted not to make a provision, saying in February that it has a relatively low market share in the motor finance business, it hasn’t received a material number of complaints and the outcome of the FCA review isn’t clear.
While firms involved in the review have engaged “constructively,” many have struggled to supply the data in a timely manner given its age or not held centrally, the FCA said, which noted it is assessing thousands of records spanning 14 years. The necessary data has now been received.
The timeline has also been impacted by Barclays’ legal challenge to a decision that centered on the bank’s motor finance business by the UK’s ombudsman for consumers with financial complaints. A hearing is expected to take place in the autumn and the FCA’s new deadline will enable it to assess the outcome that “will consider legal issues highly relevant to our review.”
The FCA said it will also extend the current pause on the eight-week deadline for motor finance firms to respond to complaints until December 2025.
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