A consumer redress scheme that also involved FirstRand unit Wesbank is moving towards payout in the UK.
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The UK’s financial regulator is moving closer to finalising a consumer compensation scheme for motor finance customers, including those of the FirstRand group, with payouts expected to begin in 2026.
The Financial Conduct Authority (FCA) is developing an industry-wide redress framework covering historical commission arrangements on vehicle finance deals, including cases where customers may not have been fully informed.
It reviewed 32.5 million motor finance agreements that consumers entered into between April 2007 and October 2024 and estimated that 44% would be considered unfair and disadvantageous to consumers.
FirstRand was brought into the case through its MotoNovo unit in the UK, which it acquired in 2006, which has a market share of about 10%.
Last October, the listed banking group said 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”.
The FCA has now indicated that it is considering over 1,000 responses to its proposals for a compensation scheme for motor finance customers who were treated unfairly.
“If we proceed with a scheme, we are likely to make several changes. If we do go ahead, we expect to publish final rules in late March,” it said.
Even with an implementation period, streamlining the process means millions of people would receive compensation in 2026, the FCA said.
The FCA argued that certain motor finance commission models may have led to unfair outcomes where customers were charged higher interest rates without clear disclosure that dealers could influence pricing and earn more commission as a result.
The regulator’s review focuses on whether this lack of transparency meant some borrowers paid more than they otherwise would have, forming the basis for its proposed industry-wide compensation scheme.
“Over 800 misleading adverts have been removed or amended since January 2024,” the ombud said.
FirstRand has set aside £166.9 million (currently R3 billion) to cover the potential impact, based on its own analysis and current information.
The bank said this is a best estimate and could change as the regulator finalises the details of the scheme.
In its results for the year to June 2025, FirstRand said that a UK Supreme Court ruling, in which it found the bank’s relationship with a customer was unfair, was limited to that case.
The bank has said this ruling also clarified that car dealers do not owe customers a fiduciary duty when arranging finance.
However, FirstRand said it continued to receive a large number of complaints as well as County Court claims for motor finance commissions. Many of those were paused pending final appeals.
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