Car finance firm MotoNovo up for sale following redress scheme announcement
FirstRand, which owns Motonovo, says it plans to exit the UK market after the publication of what it describes as a “deeply flawed” compensation scheme
One of the country’s largest car finance firms has been put up for sale with the owners expressing their intention to leave the UK market. This follows the financial watchdog’s publication of the official car finance scandal redress scheme, which is set to cost the industry at least £9.1 billion.
In a statement to shareholders, South African bank FirstRand, which owns Aldermore, the parent firm of Motonovo, said it plans to “work with the Aldermore board and respective regulators to facilitate an orderly ownership transition”. FirstRand blames the move on the Financial Conduct Authority’s recently finalised compensation scheme, which the bank says is “deeply flawed in its construction”.
FirstRand says it has raised its provisions for the redress scheme from the £510 million originally expected to a “considerably larger” £750 million, which it says greatly outweighs the £275 million in profits recorded by its motor finance division over the previous decade.
Following the redress scheme’s publication, the chief executive of the Finance and Leasing Association, Shanika Amarasekara, criticised the scheme’s scope, saying: “We have always been clear that where consumers suffered loss, redress must be paid. But any redress scheme for a market of this size must accurately identify and compensate only those customers who genuinely suffered loss. If it is drawn too broadly, so that it also compensates customers who suffered no loss, the only real winners will be Claimant Law Firms and Claims Management Companies.”
The FCA, on the other hand, says its proposals for a redress scheme are “the best way to resolve this issue in the interests of consumers, firms, investors and the market. We estimate the cost of dealing with complaints would be over £6bn more without a scheme.”
Motonovo is said to claim roughly 10 per cent of the UK’s car finance market. Other credit providers have also been required to set aside provisions for the redress scheme. Lloyds says it has earmarked roughly £2 billion for this purpose, while Santander has now set aside almost half a billion pounds.
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