City watchdog ‘nakedly’ siding with lenders on car finance redress, MPs say
The City regulator has “nakedly taken the side of lenders” in its planned compensation scheme for car loan victims and has been “patently influenced” by concerns over profits, a group of cross-party MPs have claimed.The All-Party Parliamentary Group (APPG) on Fair Banking joined a growing chorus of critics concerned about the Financial Conduct Authority’s (FCA) proposed redress scheme, which is meant to compensate borrowers who were overcharged as a result of commission arrangements between lenders and car dealers.The APPG’s latest report has accused the regulator of buying into “doom-mongering” by lenders who claim that a large compensation bill would risk spooking investors and causing lasting damage to the UK economy.That was at the expense of car loan victims who they said were due up to £15.6bn, rather than the £8.
2bn-£9.7bn currently forecast in the FCA’s scheme, which the APPG said was based on estimates produced by the regulator in 2019.The MPs also warned that the scheme hinged on overly complex calculations that lenders could exploit while acting as “judge and jury” on their former customer’s claims.“Rather than siding with consumers in deciding the levels of redress, the regulator appears to have nakedly taken the side of lenders, working to protect their profit margins rather than the pockets of consumers,” the report says.“Time and again in its consultation document the FCA warns how ‘higher [redress] costs to firms could dent profit margins’ or ‘higher costs to lenders in this scenario could have knock-on impacts on lender profit margins’.
These warnings all follow the same basic pattern: a warning about profits, caveated with the risk to the market of lenders withdrawing their products and hitting consumer choice.”Banks are due to pay out £700 per claim on average under the FCA’s proposals, which the APPG says is far less than the £1,500 average payout that some could receive by taking their cases to court.However, banks and the FCA have warned that borrowers who use claims firms to take their cases to court may end up losing up to 30% of their compensation in legal fees.Lenders and lobby groups have for months warned that a massive bill could deter investors, force some lenders to fold, or raise borrowing costs for consumers as lenders try to recoup their costs.The chancellor, Rachel Reeves, attempted to intervene in a landmark supreme court hearing in January when she urged judges to avoid handing “windfall” compensation to borrowers.
At that point, lenders including Lloyds, Barclays, Close Brothers and the financial arms of manufacturers such as Ford were steeling themselves for a compensation bill worth up to £44bn.A supreme court case in August brought further clarity and significantly brought down the regulator’s estimates of the potential compensation bill.Lenders have continued to lobby against the £11bn bill, which accounts for administrative costs.Last week Santander UK’s chief executive, Mike Regnier, called for further interventions by ministers, claiming the FCA’s current proposals could end up inflicting “significant” harm to consumers, jobs and the broader economy.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionThe APPG member and Labour MP Siobhain McDonagh suggested that those lobbying efforts had seeped into the FCA’s proposals.
“Our core finding is that the FCA has patently been influenced by the profit margins of the lenders when deciding upon levels of redress,” she said.“From proposing that lenders act as judge and jury on their own cases, to the extraordinarily low compensatory interest rate on offer, the scheme acts against the interests of the consumer and markedly favours sector interests,” McDonagh, who separately serves as a member of the Treasury committee, added.“Ultimately, this report comes to a clear and unambiguous conclusion – the redress scheme as proposed is not fit for purpose.”The FCA said in a statement: “We have proposed a scheme to fairly compensate motor finance customers in a timely and efficient way.We recognise that there will be a wide range of views on the scheme and not everyone will get everything they would like.
But we want to work together on the best possible scheme and draw a line under this issue quickly.“That certainty is vital, so a trusted motor finance market can continue to serve millions of families every year.”The Financing and Leasing Association was contacted for comment.
Safety of train users and staff is paramount | Brief letters
The new east-west train service between Oxford and Milton Keynes has been delayed due to the government and rail companies insisting on driver-only trains. We have just experienced a mass stabbing of passengers by a lone attacker on a busy train in Cambridgeshire, where a railway employee made a heroic attempt to protect them (Report, 2 November). Is this really the time for leaving the public and the train driver at the mercy of single manning?Jessica HolroydMilton Keynes Three cheers for the lost, lamented A-level history personal study. Some students undertook original research and some, like Cathy O’Neill in 1977, unearthed a real gem (Lost grave of daughter of Black abolitionist Olaudah Equiano found by A-level student, 1 November). Worth 25% of their final grade, it was the part of the course which students enjoyed most and from which they learned the most about history
UK factories return to growth after JLR restarts operations; US manufacturing exports hit by tariffs – as it happened
UK manufacturing output has expanded for the first time in a year, helped by the restart of production at Jaguar Land Rover following its recent cyberhack.The latest poll of purchasing managers at UK factories, just released by S&P Global, shows that manufacturing output rose for the first time in a year in October.S&P Global reports that production volumes rose in the consumer and intermediate goods industries, partly due to a boost from the staged restarting of production at JLR last month.This helped to lift the wider UK Manufacturing Purchasing Managers’ Index to a 12-month high of 49.7 in October, up from 46
UK economy ‘doomed’ under Labour, says Ryanair chief
The UK economy is “doomed” under the Labour government, the boss of Ryanair has said before this month’s budget, as the airline revealed a jump in first half profits.Michael O’Leary, the chief executive of the budget airline, hit out at Rachel Reeves, accusing the chancellor of failing to deliver on her programme of economic growth.“The UK economy under the current leadership is doomed,” he said. “The UK badly needs growth, but the way to deliver growth is through selective tax cuts … you are not going to grow the UK economy by taxing wealth or by taxing air travel.”It comes as airlines brace for the possibility of another increase in air passenger duty (APD) at the budget on 26 November
Kimberly-Clark to buy Tylenol maker Kenvue in landmark $40bn merger
Kleenex and Huggies maker Kimberly-Clark unveiled plans to buy Kenvue, the embattled consumer health conglomerate behind Tylenol, in a landmark deal for more than $40bn.The blockbuster takeover comes weeks after Donald Trump claimed Tylenol heightens the risk of autism in children when it is used by pregnant women, an assertion hotly contested by scientists and contradicted by studies.The high-profile claims compounded months of struggles for Kenvue, which ousted its CEO in July and endured sharp stock market declines.Kenvue, which also makes Listerine mouthwash, Neutrogena skincare products and Johnson’s baby oil, was spun out of Johnson & Johnson two years ago. Its shares jumped 17% on Monday morning, while Kimberly-Clark dropped 12% in New York
Nearly 90% of jobseekers unable to get long-term work despite millions spent on private job agencies
Australia’s private employment services are failing to get jobseekers into long-term work, despite costing taxpayers millions of dollars each year, department documents show.Just 11.7% of jobseekers in Australia found long-term employment through a job provider in the latest financial year, according to the Department of Employment and Workplace Relations’ annual report.Service providers are allowed to claim publicly funded outcome payments when clients have completed four, 12 and 26 weeks in employment – regardless of whether the client or provider found the job.Guardian Australia has previously revealed many jobseekers who find their own employment were bullied into handing over payslips so providers can claim the public money
Jaguar Land Rover restart helps UK factories return to growth
UK factories staged a recovery in October after the reopening of Jaguar Land Rover operations and a pick-up in consumer spending, according to a closely watched survey of the manufacturing sector.The S&P Global purchasing managers’ index (PMI) rose to a one-year high as business optimism improved and factory output expanded.Jaguar Land Rover, Britain’s biggest carmaker, supported the recovery after it began reopening facilities hit by a cyber-attack that some experts estimated cost the UK economy about £1.9bn.Manufacturers were able to shake off some of the uncertainty from Donald Trump’s tariffs
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