THE Chancellor Rachel Reeves (below) is said to be stepping in to minimise the impact on motor finance lenders at the centre of the Court of Appeal ruling.
According to a report in today’s FT.com – Rachel Reeves intervenes in UK car finance mis-selling case to protect lenders – the Chancellor is looking to protect motor finance providers from millions in payouts as a result of the misselling of car finance.
There are deep rooted concerns that a huge compensation bill will make finding finance for a car more difficult and more expensive.
According to Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, consumer car finance new business is expected to be around £38.9 billion in 2024, a similar figure to 2023. But the “outlook for 2025 looked challenging”, she added.
Looking to the wider picture, the Chancellor is also keen to make the UK a safe place for investors; with uncertainty over areas such as the provision of vehicle finance and the accompanying potential compensation bill, it could severely damage Britain’s reputation as a place to do business.
No doubt the Chancellor is also fully aware of Santander Bank’s threat to pull out of the UK, which surfaced yesterday over its lower than expected returns and its potential exposure to the car finance misselling.
While the car finance misselling issue is focused on dealer finance, the impact has been felt widely across the leasing broker sector where commission disclosure on PCH business is common across the board, less so on business contract hire.
Following the Court of Appeal judgement, the FCA recently extended the amount of time motor finance firms had to respond to commission complaints.
According to the latest BVRLA leasing report (January 2025), the association’s fleet grew by 1.4% with 1.94m vehicles funded through contract hire. A full analysis will be published next week.
Comment from Mike Thompson, Chief Operating Officer, Leasing Options
“We appreciate the government’s recognition of the potential economic impact of the motor finance commission case and the steps being taken to balance consumer protection with industry sustainability.
“The Court of Appeal’s ruling emphasises the need for greater transparency and customer-informed decision-making within the motor finance sector. At Leasing Options, we have long upheld these principles, ensuring our customers are provided with clear, upfront information to build trust and confidence in their leasing decisions.
“However, we also share the industry’s concerns regarding the broader implications of these changes. It is critical to establish a predictable regulatory framework that allows businesses to operate sustainably without compromising customer access to competitive motor finance solutions. Any approach must protect both the consumer and the industry from unnecessary disruptions, especially given the current economic challenges.
“The FCA’s decision to extend timelines for handling complaints is a pragmatic step, helping to ensure firms have the capacity to meet the new requirements effectively and consistently. We also echo calls for collaboration across the industry to navigate these changes, as it’s vital to maintain the UK’s reputation as a reliable and attractive market for businesses and consumers alike.
“Leasing Options remains committed to supporting positive outcomes for consumers and the motor finance sector. By working together, we can uphold the highest standards while preserving the long-term health of the industry.”
Ralph Morton is the leading journalist in the leasing broker sector and editor of Broker News, the website which provides information and news for BVRLA-registered leasing brokers. He also writes extensively on the fleet and leasing market in both the UK and Europe.
