Santander UK urges government action on motor finance compensation amid ‘job loss’ fears | Personal Finance | Finance

Santander UK’s chief executive has issued a plea for Government intervention amid concerns over the impact of the motor finance compensation scheme, leading to the lender postponing its third quarter results until it can gain “greater clarity” on proposals from the City watchdog.

The Spanish-owned group was scheduled to release figures on Wednesday, but stated that it is still assessing the implications of the Financial Conduct Authority’s proposed redress scheme for both itself and the wider industry. Mike Regnier, Santander UK’s chief executive, urged the Government to intervene, expressing fears that the planned compensation scheme could affect the car finance market and broader motor sector, potentially resulting in “significant” job losses.

The high street banking behemoth has already set aside £295 million to compensate customers who were unfairly sold a car loan.

It was widely anticipated that Santander would increase its provision in the third quarter figures, following the example set by Lloyds Banking Group and Barclays in their third quarter figures last week.

However, Santander stated that it requires more time to evaluate the impact on its provisions as it believes there is “uncertainty regarding the final scope, methodology and timing of any redress scheme that may ultimately be implemented”.

The group anticipates providing further updates on this matter in its final results early next year.

Santander emphasised that even under a “severe downside scenario”, it does not anticipate any rise to its current provision for motor finance redress to have a “material adverse impact on its capital or liquidity positions, operations, financial condition or prospects”.

The Financial Conduct Authority (FCA) unveiled proposals earlier this month for a compensation scheme after discovering that payouts were owed on approximately 14 million unfair car finance deals, estimating that each payout could average roughly £700.

Mr Regnier stated: “We believe that the level of concern in the industry and market is such that material changes to the proposed FCA redress scheme should be an active consideration for the UK Government.

“Without such change, the unintended consequences for the car finance market, the supply of credit and the resulting negative impact on the automotive industry and its supply chain could significantly impact jobs, growth and the broader UK economy.

“This could also cause significant detriment to the consumer. What is at stake is the supply of credit that customers need and that supports a very important sector for the economy.”

The FCA declared the industry needed to “draw a line” under the motor finance scandal and that the proposed compensation scheme represented the fairest approach to achieve this.

An FCA spokesman commented: “We believe a compensation scheme is the best way to settle, for both lenders and consumers, liabilities that exist no matter what. Alternatives would cost more and take longer.

“It’s vital we draw a line under the issue so a trusted motor finance market can continue to serve millions of families every year.”