The Financial Conduct Authority (FCA), the City regulator, has indicated its intent to scrutinize lenders claiming the loss of customer records relating to mis-sold car loans. This action is aimed at ensuring that affected consumers can access a potentially large compensation fund, estimated at £18 billion. The FCA is contemplating whether to extend its redressscheme to contracts dating back to 2007. However, some lenders have expressed concerns about their ability to retrieve records from that period.
During a recent session with the Treasury committee, FCA Chief Executive Nikhil Rathi stated that the lack of data would not be accepted as a blanket justification for inaction. He emphasized that the FCA would investigate such claims thoroughly. Some lenders argue that they may struggle to verify nearly 20-year-old claims due to the likely loss or deletion of consumer data and contracts, as financial institutions typically purge such records after six years.
To address these data retrieval challenges, Sheree Howard, FCA Executive Director in charge of authorizations, suggested that lenders could collaborate with third-party companies, such as credit reference agencies, to obtain reasonable data. The FCA announced its redress scheme last month, inviting public consultation in early October. The regulator estimates that the initiative could impose costs of £9 billion to £18 billion on car lenders, with individual borrowers likely to receive substantial refunds.
This initiative follows a significant Supreme Court ruling, which deemed certain commission structures between lenders and car dealers as “unfair.” While FCA officials hope that most compensation payments will be executed within the next year, Rathi warned that disagreements from lenders over the payout plan could delay the process.
The Financing and Leasing Association, representing car lenders, signaled that it might challenge the FCA’s compensation proposals in court if they appear to favor payouts that are disproportionate to the claims. There has also been discussion about whether the regulation surrounding the motor finance sector might deter investment in the broader financial industry.
Source: https://www.theguardian.com/business/2025/sep/09/fca-car-finance-firms-compensation-scheme-car-loans