The Financial Conduct Authority (FCA) has fined a car finance provider £2,774,400. This is one of the largest fines the FCA has imposed on a consumer credit firm since it assumed responsibility for regulating the credit sector in 2014.

The firm in question was found to have failed to provide fair treatment to customers in financial difficulty. The fine was increased as the firm’s poor conduct continued for at least three and a half years, with this period beginning on April 1 2014 when the FCA started supervising the firm, and only ended on October 4 2017 after the FCA reached an agreement with the firm.

However, the firm in question co-operated with the FCA’s inquiry and did not dispute that it had broken the regulator’s rules, so its fine was then reduced by 30% – it would have been fined £3,963,500 had it contested the matter.

The issues identified by the FCA included:

  • Not providing sufficient forbearance to customers in arrears, such as giving them additional time to make repayments – a large number of customers were instead instructed to clear their arrears via a single payment
  • Failing to explain the possible consequences of falling into arrears in a way that was clear, fair and not misleading – instead many customers were directed towards having their arrangement terminated via a default termination, which was the most expensive option available

The firm has also paid £30,349,433 in compensation to 5,933 customers who were potentially affected by these failings, and this redress was paid even if there was no evidence that some of the individual customers had suffered any financial detriment.

1,405 customers were severely affected by the firm’s failings, as those borrowers subsequently defaulted after entering into unsustainable short-term repayment plans.

The Hampshire-based firm – owned by a FTSE 250 doorstep lender – provides motor finance for used vehicles and specialises in providing credit for customers who may be unable to obtain finance from mainstream car finance lenders due to their personal circumstances.

The FCA regularly speaks about the need to ensure vulnerable customers receive good outcomes. As a non-mainstream lender, the firm should have realised that many of its customers are at an increased risk of financial vulnerability, perhaps because they have a poor credit history, or no credit history at all.

On this subject, the Final Notice says:

“The non-standard market is a specialist niche market, which requires a deeper understanding of customers and their financial circumstances as the customers’ needs are far more varied and changeable than customers of mainstream lenders.”

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

“Moneybarn did not give its customers, many of whom were vulnerable, the chance to clear their arrears over a realistic and sustainable period.

“It also did not communicate clearly to customers, in financial difficulty, their options for exiting their loans and the associated financial implications, resulting in many incurring higher termination costs. These were serious breaches.

“After discussions with the FCA, Moneybarn voluntarily paid more than £30 million in redress to customers potentially affected by its failings.  The FCA gave Moneybarn significant credit for this in assessing the size of the penalty imposed.”

The firm’s managing director said:

“We are happy that all customers potentially affected by these findings have been fully compensated for any detriment they might have suffered.

“The processes we have had in place since 2017 are clear, effective and appropriate. The FCA has clarified its expectations of lenders in these important aspects of customer treatment, which will provide guidance for all finance companies within the motor industry.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article