The group noted the Financial Conduct Authority’s (FCA’s) consultation on a proposed compensation scheme relating to historical motor finance commission arrangements, in which the regulator estimated a total compensation payout of £8.2m from lenders, and each consumer receiving £700 on average.
This followed the Supreme Court judgment on cases in August that motor dealers did not owe fiduciary duties to consumers and lenders “could not be liable in equity as dishonest assistants” of any breach of fiduciary duty. However, in specific cases, motor finance companies entered unfair relationships with consumers, and commission will be repayable.
Santander UK said it was reviewing the consultation “in detail” to understand the implications and said the FCA’s approach “differs in important respects” from the Supreme Court’s ruling.
The bank said the legal basis for the scheme was not clear and was still in the consultation stage, so there was uncertainty about the final scope and timing of any redress scheme.
Santander UK said it expected to be in a position to provide further information with its Q4 results.
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It said even in a severe downside scenario, it was not expected that any increase to provision would have a “material adverse impact” on its financial position.
Mike Regnier, chief executive of Santander UK, said: “We believe that the level of concern in the industry and market is such that material changes to the proposed FCA redress scheme should be an active consideration for the UK government. Without such change, the unintended consequences for the car finance market, the supply of credit and the resulting negative impact on the automotive industry and its supply chain could significantly impact jobs, growth and the broader UK economy. This could also cause significant detriment to the consumer.
“While the FCA considers the outcome of its consultation, we believe it is our duty to do all we can to secure an orderly and fair outcome from this consultation process. This is not a question of investor versus customer interest, quite the reverse. What is at stake is the supply of credit that customers need and that supports a very important sector for the economy.”
