Source: Sharecast
Car companies' in-house finance arms, known as captive lenders, may be exempt from having to pay some redress after banks and carmakers warned that the scandal could hurt future investment in the UK.
The scandal mostly relates to discretionary commission agreements, where commission is paid by lenders to dealerships to provide motor finance, often with incentives to secure loans at higher interest rates.
However, the industry argues that in-house finance teams should not face the total penalties other lenders are subject to since they do not have the same so-called "tied agreements" between finance companies and dealerships.
They argue that in-house teams often lend at discounted rates – sometimes as low as 0% – to incentivise customers in a purchase.
According to the regulator's prior estimates, captive lenders account for 47% of the £8.2bn in compensation owed to consumers. When accounting for administration costs, the scandal in total is estimated to cost lenders £11bn collectively.
Commenting on the latest reports, the FCA said: “We’re carefully considering feedback and decisions on final scheme rules have not been taken.”
