FirstRand questions fairness of proposed UK motor finance compensation scheme

FirstRand, which owns several financial institutions including vehicle financing entity Wesbank, has stated that a proposed UK redress scheme for motor finance commission practices appears to have moved “beyond the group's expectations of what can be considered proportionate or reasonable”.

FirstRand's UK finance operations primarily focus on providing car finance through its MotoNovo Finance business.

The financing company said its initial view as in response to a statement and consultative paper published by the UK's Financial Conduct Authority (FCA) outlining a proposed redress scheme.

The FCA is proposing a compensation scheme to compensate motor finance customers it says weren’t fairly treated.

FirstRand, which requires more time to fully review the paper, also questioned the scheme’s presumptions of unfairness.

The group stated these presumptions do not appear to fully reflect the recent legal clarity provided by the UK Supreme Court, which ruled that unfairness should be assessed based on multiple, specific facts.

FirstRand said it will consult with the FCA to clarify these issues and gain clarification on some data inconsistencies and will update shareholders once it has more clarity on next steps.

The FCA’s process covers motor finance customers it deems to have been treated unfairly between 2007 and 2024, largely due to undisclosed commissions or contractual ties between lenders and brokers.

The regulator estimates around 14.2 million agreements – 44% of all loans since 2007- may have been unfair. “The majority of motor finance agreements will not qualify for compensation,” it said.

The scheme would cover loans with discretionary commission arrangements, high commissions, or contractual ties, with compensation calculated using a combination of estimated overpayment and commission, plus interest.

Average payouts are expected to be around £700 per agreement, which will be paid for by motor finance companies that allegedly didn’t disclose full details of an agreement should they be found to have acted unfairly, the FCA said.

Consumers who have already complained will be automatically included unless they opt out, while others can opt in once contacted by lenders.

Lenders, rather than brokers, will deliver the scheme, with brokers required to provide information to support its operation.

The FCA said the scheme is designed to provide a simpler, fairer, and faster route to compensation, avoiding lengthy court processes and protecting the integrity of the motor finance market.

Consultation closes on November 18, with final rules and launch expected in early 2026 and compensation to begin later that year.

Consumers who have already complained will be automatically included unless they opt out, while others can opt in once contacted by lenders.

Lenders will deliver the scheme, with brokers required to provide information to support its operation.

The FCA said the scheme is designed to provide a simpler, fairer, and faster route to compensation.

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