As the motor finance industry awaits the Supreme Court’s ruling on the scale of a potential redress scheme, lenders have been advised to prepare for the worst, without losing sight of their day-to-day operations.
The landmark Court of Appeal ruling last October, opened the door for car finance firms to face complaints and compensation claims across all types of commissions, not just discretionary commission arrangements (DCAs). In response, the Supreme Court granted two car finance lenders permission to appeal the decision.
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Adding to the uncertainty, the Supreme Court recently rejected an intervention from Finance Minister Rachel Reeves, and with a hearing set to take place by April, it remains to be seen how these legal proceedings will shape the Financial Conduct Authority’s final stance.
The bottom line? Regardless of how the FCA rules, lenders are likely to face months of costly disruption. But this shouldn’t have to impact important business needs, customer service. Having worked in financial services for years, I’ve seen firsthand how regulatory shifts can reshape entire sectors overnight. The firms that act now – rather than waiting for the ruling – will be best positioned to navigate the fallout while maintaining customer trust and business continuity.
So, what should lenders be doing to prepare for a surge in complaints and compensation claims?
Managing the operational burden
Whatever the Supreme Court’s decision, lenders should expect a significant operational strain. The priority should be ensuring that all activities related to the investigation are ringfenced from business-as-usual (BAU) operations. Handling complaints, DSARs, and potential redress claims efficiently will be critical to avoiding disruption to existing service levels.
Once a decision is made, there will need to be robust reporting in place once along with clear timescales for how firms must process cases. At the same time, existing complaints and DSARs will still need to be managed within the current regulatory framework. Many firms have already introduced new categories within their complaints systems to track this activity separately, ensuring their standard BAU operations remain intact.
Capacity will be another key challenge. The volume of incoming claims – particularly from claims management companies (CMCs) – could escalate rapidly, increasing workloads exponentially. Some firms saw workloads quadruple during previous financial mis-selling cases. Lenders must assess whether their current workforce and systems can handle such a surge or if they need to bring in external expertise and additional resources to maintain service levels.
Learning from past financial investigations
Learning from past financial investigations, particularly the PPI scandal, organisations now understand the critical importance of being fully prepared. Consequently, most organisations now develop detailed playbooks and engage in scenario planning for remediation activities, addressing potential financial redress, operational impacts, process changes, third-party support, system modifications, and change roadmaps.
Another important lesson we should take away is about prioritising the customer. Demonstrating a consistently positive customer experience is not merely a reactive measure, but a proactive and well-thought-out strategy that helps to build trust and loyalty during times of uncertainty.
Balancing compliance with customer experience
The pressure exerted by regulatory investigations will test lenders’ ability to maintain strong customer relationships, while simultaneously navigating the heightened regulatory scrutiny.
How firms handle complaints will be a defining moment.
Those firms that manage the process effectively can reinforce customer trust, whereas those that mismanage the process risk significantly damaging their reputation. Claims management companies frequently submit bulk claims, which dramatically increase workloads within a short timeframe. Therefore, ensuring that teams can process these claims effectively while maintaining quality outcomes will be crucial.
Employees must feel adequately supported in managing high workloads without rushing decisions or compromising accuracy.
Complaints are often considered a “moment of truth” for customers and can significantly influence net promoter scores (NPS). Lenders should view this period as an opportunity to reinforce customer trust rather than merely fulfilling a compliance obligation. Investing in comprehensive staff training is essential for creating happier and loyal customers. Furthermore, ensuring clear and consistent communication with customers is paramount. Implementing digital tools, such as self-service portals and automated workflows, will help maintain a positive customer experience during this period of disruption. These strategies will allow lenders to effectively navigate regulatory pressures while preserving and enhancing customer relationships.
The road ahead
Industry experts are predicting that the motor finance investigation could become one of the most significant regulatory challenges in recent years. The firms that take proactive steps – strengthening operational frameworks, implementing robust complaints handling processes, and ensuring transparency with customers – will be best positioned to navigate the challenges ahead.
A well-structured response will be essential for minimising financial and reputational risks. Anything short of a strategic, well-executed plan could have long-term consequences for lenders in the motor finance sector. Now is the time to prepare, safeguard BAU operations, and ensure that customer experience remains at the forefront of the response strategy.
Martin Pearson is SVP New Business Development at Firstsource, a provider of customer-centric business process management services.
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