High street bank Santander has launched a scathing criticism of the car finance compensation scheme and delayed the release of its financial results “in light of uncertainties” it has caused.
The Spanish-owned lender called for government intervention – warning it sees the scheme as posing a wider threat to the economy, jobs and consumers.
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The scheme was set up by financial regulator, the Financial Conduct Authority (FCA), to compensate people mis-sold car loans.
Under FCA proposals, up to 14.2 million people could each receive an average of £700, as lenders broke the law by failing to disclose they paid commission to brokers. It meant customers lost out on better deals and sometimes paid more.
The proposal differs, Santander said, “in important respects” from the Supreme Court ruling that paved the way for the redress plan.
Mr Regnier said: “We believe that the level of concern in the industry and market is such that material changes to the proposed FCA redress scheme should be an active consideration for the UK government.
“Without such change, the unintended consequences for the car finance market, the supply of credit and the resulting negative impact on the automotive industry and its supply chain could significantly impact jobs, growth and the broader UK economy.
“This could also cause significant detriment to the consumer.
“What is at stake is the supply of credit that customers need and that supports a very important sector for the economy.”
Deferred results
Santander was due to publish its latest financial figures on Wednesday morning, but has held back until it says it gets “greater clarity” on the scheme and its impact on the bank and the wider market.
No new date to report results was given. Release of the same third-quarter results last year was also deferred due to uncertainty over the impact of car loan mis-selling.
The hit to Santander, however, is not expected to impact its operations or financial position, even in a worst-case scenario for the bank where it has to allocate more funds for compensation, it said.
It had already set aside £295m to deal with the mis-selling.
The FCA said, “We believe a compensation scheme is the best way to settle, for both lenders and consumers, liabilities that exist no matter what.
“Alternatives would cost more and take longer. It’s vital we draw a line under the issue so a trusted motor finance market can continue to serve millions of families every year.”
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Santander said it was committed to “ensuring fair outcomes” for its customers and will continue engaging constructively with the FCA, HM Treasury and other stakeholders.
Santander UK shares were up 0.5% following the news.
