Firms must hold back funds for motor finance probe, warns regulator
The Financial Conduct Authority (FCA) also revealed that many firms “are struggling to promptly provide the data we need” for the probe.
Earlier this year, the regulator launched a review into whether people could be owed compensation for being charged too much for car loans, following a high number of complaints.
The ombudsman service said in January it had heard from more than 10,000 people who fear they were charged too much for their finance and suggested it will look to secure settlements if it finds widespread misconduct.
In an update on Friday, the regulator said it is progressing with the review but highlighted some issues in securing necessary information from companies.
“Firms involved in our review have engaged with us constructively,” the FCA said.
“However, many firms are struggling to promptly provide the data we need.
“Reasons for this include data being stored on multiple systems and/or being spread between lenders and brokers.
“In some older cases, firms have not retained all relevant records.”
The watchdog has written to firms involved in the investigation to call on them to adequately engage with the process and ensure they have funds needed.
“We expect you to undertake an assessment of whether your firm’s financial resources are adequate,” the FCA told companies in the letter.
The scale of potential settlements over the issue remains unknown, but consumer champion Martin Lewis said car finance mis-selling has the potential to be the “second-biggest reclaim payout in UK history” after the PPI scandal.
UK banks have already confirmed they have set aside a significant funding to potentially address the issue, with Lloyds Group telling shareholders they have a provision worth £450 million to cover potential costs.
In the update, the FCA also confirmed that Barclays bank has launching a judicial review appeal against the Financial Ombudsman Service judgment which sparked the FCA review process.
The FCA said it will set out its next steps in the review process by September 24 at the latest.
