As the motor finance industry awaits the Supreme Court ruling on motor lender’s discretionary payments, RSM UK is advising lenders to do all they can now in preparation for likely customer redress. The latest FOS Complaints Data highlights motor hire purchase was the top subject of complaints to the ombudsman last year, reaching over 76,000, many of which may be linked to the mis-selling of motor finance.

Last month the FCA took the unusual step of publishing its key considerations around what a potential motor finance redress scheme could look like ahead of the Supreme Court ruling, which is expected later this month.

Zoe Morton, risk assurance director, RSM UK said: “This highly irregular move from the FCA is very telling, and suggests that a customer redress scheme is now highly likely. Exactly what this looks like is unclear until we have the Supreme Court ruling, however we’d advise motor finance lenders to take steps now to ensure all customer data is up to date, robust and complete. Not only is this good practice, but it will put firms in pole position to handle the potentially large volume of customer redress claims that could be heading their way soon.”

RSM UK recommends firms check their customer data is in order, to ensure they are ready to respond to the potentially high volume of complaints and redress. Zoe Morton continued: “Motor lenders with legacy systems should consider the availability of data, particularly where this is held in more than one place, to ensure that when the Supreme Court ruling is given, they have removed any barriers to starting the redress process. Ensuring data sources are up to date and complete is never time wasted, and is in line with the expectations of the Consumer Duty, as up to date information about consumers helps ensure the right level of support and understanding.”

RSM UK recommends firms consider the following to ensure customer redress runs as smoothly as possible.

How many customers could be impacted?

This will depend on the verdict given, and whether the approach is ‘opt in’ ie. customers have to claim by a certain deadline, or whether redress will need to be paid out automatically to all customers who are in scope to receive compensation. Either way, firms should assess now which customers could potentially be in line for a pay-out, so they can understand the potential scale of the impact and the likely cost.

What’s the value of the finance arrangement?

What has the customer paid, and what commission structures were in place at that time? How much of this was commission to the motor finance broker?

What resource will be needed?

Firms will need to consider which staff will deal with the redress scheme, whether any training is needed, and how they will balance this with other ‘business as usual’ activities.

Do firms have the records available?

The redress scheme is likely to have a big operational impact on firms in terms of dealing with the claims once the SC ruling hits, so getting all data in order now is essential to be ready for redress.

Are customer communications up to date?

Motor finance firms should consider all customer communications, from websites and social media to letters and emails, to ensure customer information on this issue is clear, up to date, easy to understand, and delivered in the right format. It’s important to consider all customer communication needs, including those who may not be digitally savvy, and those with additional requirements.

Zoe Morton concluded: “There may be much work to do for many motor finance firms, so now is the ideal time to start ahead of the Supreme Court ruling.”

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