Video transcript: FCA targeted support proposals

Transcript

Andrew Strange: On the 1st of August, the Supreme Court ruled on three appeals cases related to motor finance commissions, as I'm sure you've seen in the press. Two of the cases failed, and the court ruled the car dealers do not owe a fiduciary duty to their customers and therefore there was no basis for common law bribery.

However, one claim did succeed on the basis of the arrangement was unfair under the Consumer Credit Act, it was upheld on a balance of issues, including the significance of the commission, the fact that it was held out to be a panel when in fact the lender was tied and the detail of the documentation and the ability of the customer to understand it.

The FCA responded quickly. On the 3rd of August they announced that they were going to commence section 404 redress scheme, and the FCA has to consult on this to give firms and consumer groups and the Ombudsman who'll be bound by it time to engage in terms of the approach and the scope. And they aim to issue a consultation on this by early October, with a six-week duration. The FCA then expects the redress scheme to commence in early 2026 and consumers will get their compensation during 2026.

Clearly the scope and the approach of the scheme will be in the consultation. However, we know that the FCA is keen for firms to consider cases going back as far as 2007, which presents a real challenge in terms of data for some organisations. Discretionary commission agreements will be in the scope of the redress scheme, although the FCA is going to consult on whether non-discretionary arrangements should fall into scope. At this stage it's not clear whether this will be on an opt in or an opt out basis with the regulator talking about pros and cons of both and it's also not clear from the scope at the moment around how the relevance of customer sophistication will be involved, and how firms will collect the relevant data.

Clearly at this stage firms need to really proactively engage with the regulator. The consultation is by the start of October, but the regulator is heavily engaged with firms directly already and with trade associations as well. So firms need to be thinking about the practical implications for their business, including access to data and proactively engaging with the regulator.

Firms also need to already be considering an assessment of some of the implications of the Supreme Court ruling itself around unfair relationships, in particular thinking about what levels of commission have been paid, disclosure of commissions and wider client communications, which may have resulted - on balance - in harm. And there's other issues around that, so they can be ahead of the curve and ready to commence the redress scheme rapidly.

As always, we have a number of partners who've been heavily involved in this activity. If you'd like to talk to somebody at PwC about this in some more detail, we'd be delighted to talk to you.