Bosses sound alarm on Reeves’s Budget as confidence evaporates
Banks have sounded the alarm over the motor finance crisis, warning that poorer drivers could bear the brunt of an expected surge in loan costs.
The Finance & Leasing Association (FLA) and National Association of Commercial Finance Brokers (NACFB), who represent lenders and brokers, said a landmark legal ruling could lead to less choice for hard-up customers.
Jim Higginbotham, head of NAFCB, said smaller operators may be forced to exit the market due to higher costs of complying with the new rules, which set a higher bar for commission disclosures.
“You might get different niche operators falling out of the marketplace, and you might get less choice for customers,” he said.
“The price point will probably remain static but I do think there’ll be a reduction in customer choice as a result of this”
FLA chair John Phillipou said: “Access to credit is a real problem.
“There is a ‘poverty premium’ that vulnerable people with lower credit ratings have to pay to borrow.
“There’s a risk here as we get into consumers buying a £5,000 car and the percentage of what’s acceptable on commission, it could impact the access to credit for that cohort of business.
“There’s a piece of work for the government and the regulator here to contemplate – if the rules come down too harshly on this … and you put rules around hard percentages, it could be problematic for deploying for lenders’ money.”
The Court of Appeal last week ruled that car dealers owed a duty to their customers to tell them how much commission they earn – triggering chaos across the country as dealers scrambled to comply with the ruling.
Mr Phillipou said the FLA had told the Government that investors were “anxious”, and international investors “completely bemused” by the situation.
“This situation is at stark odds with the government’s growth agenda,” he said.
The FLA met with Treasury officials on Tuesday and the Financial Ombudsman and Financial Conduct Authority yesterday to discuss the matter.
