Jaywing's redress roadmap

Drawing on extensive experience in motor finance and similar redress programmes, we streamline the process and ensure compliance with regulations, providing you with clear guidance every step of the way. 

Below, you'll find Jaywing's key considerations for approaching a redress programme to support the outcomes of the current FCA DCA investigation. This method acts as a strong foundation, upon which we can layer any additional requirements specific to your organisation. This ensures a truly bespoke solution that addresses your unique challenges and goals. The key to a truly successful programme though, is to act now.

Data preparation: Ensuring the foundation for the redress activity is as robust as possible

  • Redress strategies will need to be defined to identify the data required and the desired order in which redress is paid.

  • The data preparation will be more challenging if the data resides on multiple platforms, including legacy.

  • Data quality and completeness tests should be performed to prepare the in-scope population sample.

  • Redress strategies may well have to be adjusted once the availability and quality of the data is known.

  • Changes in strategy may also affect redress calculation and eligibility, so segmentation data needs to supplement calculation data.

  • The ongoing maintenance of data to sustain the calculation -> segmentation -> execution cycle can be challenging given that the length of this process will be necessarily protracted.

Identifying the eligible population: Ensuring that every customer that should be eligible is included, and equally importantly, that any that are ineligible, are not

  • Identifying which customers took up a car finance (HP/PCP) loan agreement with an inception date during the relevant period.

  • Understanding which of those customers have a loan facility brokered under a DCA.

  • Qualifying if any customers ineligible for other reasons for example, application fraud or if they have criminal convictions.

  • Insufficient data may prevent any certainty around definitively identifying DCAs. In these circumstances agreement must be sought for the eligible population using whatever data and / or information available.

Redress calculation for the amount of compensation owed – based on fairness, eligibility rules and in a timely way

  • Determined by calculating the difference between the interest charges under the DCA versus the base rate they should have been charged and / or including any other relevant factors as specified in any redress / eligibility rules.

  • Identifying base rate will be problematic given it will vary over time, and it can be based on other factors e.g. supplying dealer, vehicle model, vehicle age, amongst other things.

  • An 8% statutory annual interest rate should be applied to the redress amount to incorporate the time value of money. The amount due at the point of calculation and the point at which the payment is issued must match or a recalculation will be required.

Issue payment – and applying controls to ensure payments reach the right customers, in the right way

  • Operationally paying redress also requires data, which is typically time-sensitive.

  • Not only is up to date information on the customer needed, but also information on the payment process; these data determine the organisation's ability to pay redress in a timely manner and / or potentially in phases, and can also affect segmentation strategies and redress and eligibility calculation.

  • The method of payments must be considered.

  • Some customers may be uncontactable at the known address or even deceased. For these customers the identification of the next addresses and how the next of kin can be traced is critical.

Governance – Ensuring there are end-to-end control processes that will stand up to scrutiny by the regulator

  • As this exercise is outside of standard operational processes a functional and / or technical specification must be written to document the approach to the redress.

  • A change control process should be drawn up, especially if any uncertainty in defining eligibility exists.

  • Independent validation of the entire redress process should be performed by a qualified party.

  • Committee structure and board responsibilities will need to be established.

Other considerations – as with all matters of this complexity, there will always be additional particular nuances or considerations to also factor in

  • There may be affected customers who subsequently entered arrears and / or had their vehicle repossessed, in which case, the additional interest payments may have contributed to causing the customer further financial loss or harm – this must be addressed specifically.

  • Where there has been arrears, potential repossession and remaining outstanding debt, this may have subsequently been sold to debt collection agencies – this must be addressed specifically.

  • Processes are required to mitigate fraudulent claims.

  • Given the scale, variability and quality of data, making duplicate payments is a risk that needs to be carefully managed.

  • Given the period to be reviewed, multiple agreements per customer are likely, which needs to be managed effectively.

Book your free consultation

Whatever stage you are at in assessing your position, Jaywing's motor finance specialists can help you develop a plan and implement this swiftly and effectively to ensure you have a robust approach to addressing this new regulatory challenge.