An industry under intense spotlight – what next with Motor Finance claims? – by Colin McMahon
Back in April, we published a blog around motor finance claims and what finance firms need to prepare for given the intense regulatory and legal spotlight on the sector, caused by the high-profile PCP and Hire Purchase legal action which has affected millions.
Fast forward six months, and 25 October saw the Court of Appeal’s ruling that some lenders did indeed fail to clearly disclose commissions paid to car dealers. Following the decision, the Financial Conduct Authority (FCA) has now urged the Supreme Court to quickly decide whether it will hear the appeal that both defendants have raised, and potentially on the substantive appeal too. The potential scale of this review has the scope to be similar to the historic PPI review, with figures quoted of up to £40 billion.
Alongside, the FCA, as we said in April, has of course been carrying out its own investigation, and is now highly likely to set their expectations for consumer redress.
It is, without doubt, an extremely uncertain time for motor finance providers who will find themselves under pressure to deal with the expected upturn in consumer contact, not only from those who know their compensation rights, but also from others who want to know where they stand and if they have overpaid on their motor finance deals. Many companies are already dealing with a surge in calls, not forgetting a barrage of emails just on this topic alone.
Remediation – where things stand now
The situation will unfold more over the coming months, but here at Sigma Connected, we are confident it will play out through three key strands – channels which we’ve already began supporting some clients with.
In summary, we believe this will cover:
Review:
The first stage, and where we are today, is there will be a review to check which consumers are impacted – looking specifically at dates and how terms and conditions were worded. This phase could also involve obtaining further information to help confirm who has, and who hasn’t, been impacted, for example proof of a finance agreement if dealing with historic complaints.
Remediation:
The second stage is likely to be remediation, which can involve using purpose-built calculators, issuing final response letters and processing redress. On top of that, providers need to consider customers who may have had multiple products rolled into one plus more complex cases such as deceased or multiple owner cases. There is so much to think about.
Quality:
The third phase will be around having a robust quality framework and review process. This will be an important stage as it’s at this point we would expect more reviews to take place, especially in the higher value cases. It’s therefore vital that customers receive good quality outcomes at this time, in line with the FCA consumer duty.
The FCA approach
It’s important to highlight the approach the FCA could take too, as we believe they will put a short complaint window in place and there is every chance they introduce a hard submission deadline, potentially having learnt lessons from the previous PPI situation.
Claims Management Companies
Aside from the FCA, another element finance firms should consider once the FCA confirm their position is the role of Claim Management Companies (CMCs). CMCs will likely, if not already, reach out to consumers, similar to PPI, to handle the burden on their behalf. CMCs are now regulated, but this could still create additional large workloads for financial providers.
To be able to handle an increased volume of claims, and do it cost effectively, needs an experienced partner with a track record of developing strategies which minimise complaints work and costs.
The lens of the Ombudsman
Lastly, we must also consider the Ombudsman. If complaints are defended, they will potentially go to the Financial Ombudsman, which will mean a tranche of case files and determinations.
If a defended outcome, whether from a customer directly or through a CMC, is sent to the Financial Ombudsman, the firm would need to provide a case file. This places additional strain on firms’ operations.
How Sigma Connected can support you and our expertise
Here at Sigma Connected we feel we’re already in a strong position to support motor finance providers due to the experience we already have working in this sector, along with the vast knowledge our senior management team have in dealing with historical PPI claims. This issue is not going away anytime soon and has the potential to create much distraction and stop the wheels spinning in your day-to-day businesses. We want to help keep those wheels moving, support your customer service offering, and offer you a bespoke approach. It is, after all, an unprecedented situation which needs tailored solutions. Sigma Connected can be a safe pair of hands and someone you can lean on with related experience.
We know how to run a remediation programme, we know how to deal with motor finance related complaints, and we can work with you to help design your policies and make sure you have the right frameworks in place – even from an off-shore option. Our colleagues in South Africa already deal with complex and often emotional complaints and queries for our clients. Another big advantage of working with us is we can ramp up numbers if you need more people quickly to deal with this issue, and ramp down when things calm down. By having the option to outsource to our teams in South Africa also means we can offer you very reasonable and competitive rates.
Even if you have your own specialist teams in place, we can backfill and support more general service queries – once again up-scaling staff numbers quickly if need be.
Ultimately, it’s about planning and preparation, so when the FCA does make an announcement, you’re ready and prepared to move confidently, step-by-step through what will be complex regulatory challenge which will not only focus on consumers, but your compliance, record keeping and every last piece of governance.
Put simply, we understand the situation you’re in, we can help you manage it, and more importantly, we will partner with you and guide you every step of the way.
If you’d like to understand more about outsourcing and how Sigma Connected can help keep you on track, get connected here.
