Banking giant Santander has allocated a substantial £295 million to cover potential compensation and legal costs related to the ongoing motor finance scandal, says Car Dealer Magazine. This move comes as the Financial Conduct Authority (FCA) deliberates on extending the deadlines for handling complaints.
The provision was announced as part of Santander UK’s third-quarter results, which were delayed due to a recent Court of Appeal ruling against Close Brothers and MotoNovo owner FirstRand Bank. The ruling has set a higher bar for the disclosure of commissions paid to dealers, leading to significant uncertainties regarding the nature and extent of any remediation actions required, says Car Dealer Magazine.
Santander’s decision to set aside funds follows similar actions by other lenders, including Lloyds Banking Group and BMW, bringing the total amount allocated to handle the crisis to nearly £1 billion. The bank’s pre-tax profits for the quarter fell to £143 million, reflecting a significant impact from the provision.
Meanwhile, the FCA is considering extending the deadline for firms to provide final responses to motor finance complaints involving non-discretionary commission arrangements. The proposed dates are May 31, 2025, and December 4, 2025. The FCA aims to ensure that consumers who are owed compensation receive it in an orderly manner while maintaining a competitive motor finance market, says Car Dealer Magazine.
Nikhil Rathi, the chief executive of the FCA, emphasized the importance of addressing the issue to protect consumers and maintain market stability. He stated that the Court of Appeal’s ruling could result in a significant number of customers being owed compensation. The FCA plans to provide further updates on the matter in May 2025, depending on the outcome of any Supreme Court application.
The motor finance scandal has drawn comparisons to the Payment Protection Insurance (PPI) mis-selling scandal, with analysts estimating potential costs exceeding £30 billion. According to the Telegraph, the FCA’s ongoing review and the recent court ruling have heightened concerns about the scale of the issue and the potential financial impact on lenders.
