(Bloomberg) -- The UK’s Financial Conduct Authority will write to the Supreme Court to ask it to move quickly on deciding whether it will take up a pair of market-moving cases involving auto lenders and how fairly they treated their customers.
Investors have been closely following the cases — which involve the lenders Close Brothers Group Plc and South Africa-based FirstRand Ltd. — because they are set to feed into the FCA’s broader regulatory probe of car finance. Both lenders have said they would appeal after losing the cases last month.
“The FCA will write to the Supreme Court asking it to decide quickly whether it will give permission to appeal and, if it does, to consider it as soon as possible, given the potential impact of any judgment on the market and the consumers who rely on it,” the FCA said Wednesday in a statement.
The move comes as the watchdog has faced a raft of criticism in recent weeks over how it’s handled its probe into the motor finance industry and the agency said Wednesday it’s met with dozens of industry participants since the recent court decision.
Shares of many of the country’s biggest lenders have suffered as investors grapple with how far-reaching the impact of both the FCA’s inquiry and the court cases will be. Some analysts have said the potential compensation costs for the industry could be anywhere between £2 billion and £10 billion ($12.7 billion).
The FCA’s probe has centered on a practice known as discretionary commission arrangements, which the agency banned in 2021. Before that, car dealers could often earn thousands of pounds for themselves, and the bank, by pushing up the interest rate they offered buyers using the practice.
In January, the regulator said it was aware that auto lenders were facing a deluge of complaints from consumers about historical discretionary commission arrangements. The FCA has paused its probe while the legal challenges tied to the matter are decided.
The recent court cases also touched on non-discretionary commission arrangements, which is a practice where the commission offered to a broker is not tied to the interest rate charged to a customer.
The agency on Wednesday said it is also considering extending the time that lenders have to respond to consumers’ complaints about these non-discretionary commission arrangements since they’re now likely to receive a “high volume” of criticism from customers.
“Any complaint extension would allow them time to consider how these might be efficiently and effectively handled,” the FCA said in its statement. “This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market.”
(Updates with additional information about the FCA’s work beginning in the eighth paragraph.)
©2024 Bloomberg L.P.
