UK bank investors are weighing the risk of fresh delays to the Financial Conduct Authority’s motor finance compensation scheme, with RBC Capital Markets analysing the implications if a judicial review is launched.
The FCA is planning to publish the final scheme by the end of March, following consultation last October.
Press reports suggest the overall hit may be softened by around £1 billion from an initial £11 billion estimate, with captive lenders benefiting most.
However, RBC believes it is “highly likely” that at least one interested party will seek a judicial review, where the High Court would be asked to assess whether the FCA acted lawfully and fairly, rather than whether the policy itself is right.
Any challenge must be filed within three months of the decision. Even on an accelerated timetable, a High Court ruling would probably take more than a year.
If a review proceeds, the FCA’s redress scheme would likely be paused, unless only a specific element is challenged. Consumers pursuing claims directly through the courts would not be affected.
At present, RBC sees motor finance as a material issue mainly for Close Brothers Group PLC.