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The ombudsman service said in January it had heard from more than 10,000 people who fear they were overcharged for their car finance
Motor finance firms have been ordered to set aside funds as the UK’s financial regulator continues its investigation into the sector.
The Financial Conduct Authority (FCA) has warned companies to hold back cash, as it faces difficulties in obtaining the data it needs for the probe. Earlier this year, the regulator launched a review into whether people could be owed compensation for being charged too much for car loans, following a high number of complaints.
The ombudsman service said in January it had heard from more than 10,000 people who fear they were overcharged for their finance and suggested it will look to secure settlements if it finds widespread misconduct. In an update on Friday, the regulator said it is progressing with the review but highlighted some issues in securing necessary information from companies.
“Firms involved in our review have engaged with us constructively,” the FCA said. “However, many firms are struggling to promptly provide the data we need. Reasons for this include data being stored on multiple systems and/or being spread between lenders and brokers. In some older cases, firms have not retained all relevant records.”
The watchdog has written to firms involved in the investigation to call on them to adequately engage with the process and ensure they have funds needed. “We expect you to undertake an assessment of whether your firm’s financial resources are adequate,” the FCA sternly warned companies in its letter.
The extent of potential payouts remains uncertain, but consumer advocate Martin Lewis suggested that car finance mis-selling could be the “second-biggest reclaim payout in UK history” following the PPI scandal. Significant funds have already been designated by UK banks to possibly remedy the situation; Lloyds Group has told its shareholders about a provision worth a sizeable £450 million set aside to handle possible costs.
In their latest update, the FCA confirmed that Barclays is making waves with a judicial review appeal against the Financial Ombudsman Service judgment which triggered this FCA review process. The authority confirmed it will unveil the forward plan for the ongoing review by no later than September 24.
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