The bank has been in business for 28 years.
A major bank has dealt Rachel Reeves a major blow after vowing to leave the UK after calling out an “unfair” scheme that will see its car finance compensation payouts soar to £750million. FirstRand has decided to quit the UK after blasting the Financial Conduct Authority’s (FCAs) car finance ruling as “disproportionate and unfair”.
It is now expected to exit from its UK challenger bank Aldermore, with the business expected to be put up for sale. FirstRand Bank has owned car finance service MotoNovo since 2006, one of the largest lenders in the UK. The business is expected to pay out a whopping £750million in compensation this year to motorists who were mis-sold car finance.
The FCA has confirmed drivers may receive £829 in compensation (Image: Getty)
The bank has revealed it will need to take an additional £510million in provisions to pay all motorists who are entitled to compensation payouts. The lender confirmed their position in statement to the Johannesburg Stock Exchange after undertaking a comprehensive assessment of the FCA statement.
FirstRand said: “The legal teams and economic specialists that provided input to the FCA’s consultative process have also reviewed the Statement.
“FirstRand acknowledges that whilst the FCA has made some changes to the scheme, that can be viewed as responses to issues raised by the group and other lenders during the consultative period, any mitigation arising from these changes has been more than offset by other amendments.
“These amendments are problematic in that they result in a financial impact above the group’s expectations. Therefore, FirstRand remains firmly of the view that for the group the final redress scheme proposed by the FCA is disproportionate and unfair.”
The FCA has outlined details of a car finance redress scheme (Image: Getty)
The statement added that “the UK as a consumer finance jurisdiction will not deliver the returns the group requires.” They stressed that the business case for FirstRand to own and operate a UK consumer finance entity was now “not within the group’s risk appetite”. The major South African financial services group FirstRand was established in April 1, 1998.
Meanwhile, Aldermore added: “The Aldermore Board will work closely with FirstRand and respective regulators to ensure an orderly ownership transition that will support Aldermore’s growth ambitions going forward.”
The FCA has confirmed that a car finance redress scheme will soon launch, with lenders set to splash out around £7.5billion in payouts. A breakdown from the FCA has suggested that every complainant could receive around £829 once payouts are finalised.