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How is the latest FCA investigation impacting business funding?

Kirsty McGregor Sep 10, 2024

You’ve probably seen lots in the consumer press about a misselling investigation by the Financial Conduct Authority (FCA), which was launched in January 2024. The focus of this inquiry is on vehicle finance providers, who may be required to pay compensation to customers that were charged too much interest.

 

Impact on the finance industry

The vehicle finance industry is worth approximately £40 billion, according to The Car Expert. As more than 90% of new cars are bought on finance, this investigation will have a huge impact on banks and lenders who need to handle these complaints and pay compensation, if required.

For example, Lloyds Banking Group, which includes Lloyds, Halifax, Bank of Scotland, and Black Horse (the UK’s largest motor finance provider), has reserved £450 million to cover potential costs related to the investigation. RBC Capital Markets estimates that the final cost for Lloyds could reach £2.5 billion. Estimates for other major lenders so far include £1.1 billion for Santander, £357 million for Barclays and £250 million for Close Brothers.

 

How does this affect your clients looking for vehicle finance?

As the investigation unfolds, there is some nervousness around lenders who are considering what the true impact may be on their businesses. 

With thousands of transactions a year, the team at Capitalise can see trends across the whole market. We are seeing the larger lenders have either withdrawn from the market completely, or have increased their rates on car and van finance, as many are nervous about increasing their potential exposure. For example, Barclays stopped offering vehicle loans back in 2019.

Challenger banks and fintech lenders are still open to lending, however and their rates are often now lower than the high street, or traditional ‘Tier 1’ lenders. 

 

How have we responded at Capitalise?

Running an older car or van can be challenging for your business clients. With rising insurance premiums, low fuel efficiency, and emission zone charges in city centres, costs are increasing and many are looking to replace their vehicles with newer models.

With 100+ lenders and a whole suite of products, we can make sure that your client accesses the best solution, across the vast range of lenders on our platform.

In addition, for clients who use the Capitalise for Business app, they can find expected costs for their company cars and vans plus source finance deals directly. If they have a make and model, or if they know a registration, they can check likely costs and also find matches and view offers for finance.

We want to ensure your client’s funding needs are seamless and transparent. So let us know how we can help you to help them, or you can share that they have a Company Cars & Vans calculator on their own business app.

 

Get in touch

You can contact your Partnership Manager directly if you need more information about vehicle finance for your clients. Alternatively, you can contact us here.

If you want to share information with your clients about Capitalise for Business, please reach out. 
 

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