Auto retailers ‘on brink of £16bn DCA crisis’
The shock DCA court ruling “threatens to drive up costs for motorists and – in a worst-case scenario – bring the UK’s £100bn motor sector to a shuddering halt”.
The Finance and Leasing Association’s Adrian Dally admitted to the Telegraph that disruption is rife. “We’re all immediately having to restructure to comply with this in order to keep cars being bought and finance flowing.”
Comparisons with the PPI scandal continue, with some experts saying banks could face a bill of up to £16bn.
Lloyds Bank is to halve its £2bn share buyback plan and could face a £3.2bn compensation bill. Santander may now face a £1.4bn bill (up from £1.1bn), Barclays a £400m bill, Secure Bank has issued a profit warning and Metro Bank has paused lending.
The court ruling implies that any fees paid to brokers are unlawful, regardless of the outcomes for customers. This covers not just commission, but other things such as loan arrangement fees.
“The bottom line is that last Thursday, every motor finance agreement was lawful, but by Friday afternoon, every motor finance agreement was unlawful,” said Dally.
“That’s a really extraordinary place to be.
“Usually when you have a significant change in regulatory requirements, it is considered by the regulator, there is a public consultation, the final rules are refined and then businesses are given six months to comply. All that has been condensed into a nanosecond.”
Royal Bank of Canada analyst Benjamin Toms said that if the court ruling holds, it could result in banks pulling out of the motor finance sector altogether – which could result in customers paying more to finance their vehicles.
The FLA held an urgent meeting with Treasury officials and the FCA last Tuesday. FCA chief executive Nikhil Rathi later said in a speech the regulator is working “at pace” to find a solution and could “offer further guidance soon”.