Investec says UK motor finance market provision 'adequate'

Investec PLC and Ltd said on Tuesday its provision to cover potential compensation arising from UK motor finance arrangements remains adequate.

The UK Supreme Court decision mostly overturned judgments made by the Court of Appeal last year that ruled it was unlawful for car dealers to receive a commission on loans without sufficiently informing borrowers.

FirstRand Ltd and Close Brothers Group PLC had launched their Supreme Court bid to challenge the UK Court of Appeal’s judgement in October last year, which found that FirstRand’s London branch and other lenders intentionally did not disclose to motorists commissions they paid to car dealers.

Marcus Johnson, Andrew Wrench and Amy Hopcraft are three motorists who fought lenders in court. Lenders avoided potentially paying compensation to millions of motorists after the Supreme Court judgement.

Investec said on Tuesday it has made a provision of an estimated £30 million to address uncertainties around a number of key assumptions.

The Sandton-based financial services company said it believes that the current provision remains adequate.

The Financial Conduct Authority on Sunday said it will consult on an industry-wide redress scheme for consumers ‘treated unfairly’ by car financing agreements, which it estimated will cost lenders between £9 billion and £18 billion.

FirstRand said on Monday it might update its UK motor finance provision. Late in November last year, it had flagged the provision of £127.4 million.

Shares in Investec PLC were down 0.3% to 550.50 pence in London on Tuesday afternoon. In Johannesburg, Investec Ltd shares were down 0.2% at R 131.84.

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