Upper Tribunal suspends parts of motor finance scheme

The partial suspension means firms are not required to calculate or pay redress, or send compensation communications, until the Upper Tribunal process concludes.

Firms must, however, continue to comply with all non-suspended rules.

Key duties include identifying relevant complaints and agreements, gathering data on commission arrangements, and responding to complainants not owed compensation by scheme deadlines.

This covers cases outside the scheme's scope or those within scope but lacking the three unfair features for compensation: a discretionary commission arrangement, a high commission arrangement, or a tied arrangement.

Firms must also communicate outcomes for non-scheme aspects of mixed complaints and cooperate with the Financial Ombudsman Service.

Brokers must provide requested documents within one month.

The FCA will supervise proportionately, granting a 7-week extension for firms to inform consumers they are not owed compensation, acknowledging the time needed to finalize suspension details.

The FCA expects rigorous contingency planning from lenders, preparing for a scenario where the scheme, or parts of it, are quashed.

This involves being operationally and financially ready for a complaint-led and supervisory approach to resolve historical liabilities, in line with default statutory timelines.

Lenders should make necessary provisions and engage with their auditors, ensuring appropriate capital and liquidity are maintained in UK-regulated entities, including UK entities of international groups.

The FCA will supervise firms closely and take action, including imposing business restrictions, if financial resources are inadequate.

The Financial Ombudsman Service is also making plans to deal with a significant uplift in cases should the scheme be overturned.

Firms are encouraged to engage with the FCA for any questions and to keep complainants updated on developments.