Plan for the worst, act early: winning the remediation race

What happened?

This is the concluding part of a TCC, Momenta and Recordsure webinar on FCA redress and the future of motor finance. With the final scope of any redress scheme still awaited from the FCA, the panel focused on what firms can do now rather than wait for certainty.

The panel recommended that firms verify the integrity of their historical data, particularly where records may need to go back to 2007. Suggested areas of focus included cases involving discretionary commission, cases with high commission levels, and how disclosure of commission was handled at the point of sale.

The panel also discussed the potential for claims management companies to widen the scope of activity, including raising vulnerability and affordability issues within complaints that sit outside the current pause, and encouraged firms to triage any complaints already waiting.

Why does it matter?

The panel was clear that uncertainty over the final scope of the scheme is not a reason for inaction. Firms that prepare early, particularly on data, are better placed to secure scarce resources such as specialist reviewers once a scheme is confirmed.

The discussion also raised the possibility of wider implications beyond motor finance, noting that the same commission-related questions could extend into other parts of consumer credit, although the panel was cautious about how far the FCA is likely to take this.

Who is affected?

Motor finance creditors and their compliance, remediation and operations functions are the primary audience, alongside firms operating in the wider consumer credit market that use commission-based distribution arrangements.

Key risks

• Historical data going back to 2007 that may be incomplete, inconsistent or difficult to verify.
• Claims management companies raising affordability and responsible lending issues within complaints that sit outside the current pause.
• A shortage of specialist resource once the scope of any redress scheme is confirmed.
• Uncertainty over how disclosure of commission and distribution arrangements will be assessed.

Actions to take

1. Begin data mining historical files now, focusing on cases involving discretionary commission and high commission levels.
2. Review how commission was disclosed at the point of sale, and what firms held regarding distribution arrangements with dealers.
3. Triage any complaints already on hold, including those where affordability or responsible lending concerns may be present.
4. Assess current resourcing plans and consider early procurement of specialist support ahead of any confirmed scheme.
5. Review policies on vulnerable customers so they can respond appropriately to claims that raise vulnerability.

Wider implications

The panel noted that questions about commission-based distribution are not necessarily confined to motor finance, and that other parts of consumer credit could face similar scrutiny. The panel’s own view was that the FCA does not currently appear motivated to broaden its focus, though this could change if claims management companies pursue that angle.

Recommendations

Firms should treat the current lack of clarity as a planning window rather than a reason to pause. Verifying data integrity, segmenting cases and reviewing dealer and distribution arrangements now will put firms in a stronger position once the scheme’s scope is confirmed.

Given the scale of the resourcing challenge the panel anticipates, firms may benefit from combining internal preparation with specialist and technology-led support to review cases at pace.