The Guernsey Financial Services Commission is currently running a policy survey on motor finance. But it said that this was unconnected to developments in the UK and that local car owners would not be able to apply for the UK scheme.
The UK Supreme Court ruled last week that hidden commissions from lenders to dealers on car loans were not unlawful, however, the judgment left open the possibility of compensation claims for particularly large commissions, which the Supreme Court said were unfair.
After the ruling, the Financial Conduct Authority announced it would launch a six-week consultation in October over how a compensation scheme would work, with the first payments expected to come in 2026. It is being suggested that drivers who were mis-sold could receive about £1,000.
Both the FCA and the Guernsey Financial Services Commission have confirmed that the compensation will not be applicable to cars sold in the Bailiwick, even if they met the criteria, and the GFSC also said it was not contemplating setting up a compensation scheme of its own.
‘The proposed FCA compensation scheme will only apply to cars bought in the UK during the relevant period,’ said a GFSC spokesman.
‘Bailiwick residents who purchased cars in the UK using finance providers in the UK may be able to make claims under the scheme when it launches. For motor vehicle purchases made in the Bailiwick, or using Bailiwick motor finance arrangers and providers, the rules and compensation scheme will not apply.’
Guernsey’s Lending Credit and Finance (LCF) Law was only introduced in July 2023.
The law does not permit arrangements which include any commission linked to the charges made to customers, such as ‘difference in charges’ arrangements, which have been at the core of UK test cases which led to the compensation scheme.
However, prior to the introduction of the law in 2023, the sector was not regulated locally, and it is unclear what finance deals were available in the island.
The spokesman said that only since the introduction of the new LCF Law had the commission taken responsibility for regulating loans and other consumer credit products, including car financing.
‘This means that firms offering or arranging loans in the Bailiwick of Guernsey must follow rules designed to protect consumers, and they should treat their customers fairly,’ he said.
The commission has launched a survey asking local residents to share their personal experiences of car financing in the Bailiwick since the LCF Law came into full effect.
It is looking at the findings of the survey to identify common trends and find out if customers were being treated fairly and in accordance with the new LCF requirements – but only covering the past two years.
‘The commission’s focus is on ensuring that the relatively new law is operating as expected – in the interests of Bailiwick residents – so that any wrinkles in terms of how it has been implemented can be ironed out,’ he said.
‘For the avoidance of doubt, the commission is not contemplating establishing any form of a compensation scheme but will feedback any lessons learnt from this piece of thematic supervisory work to those providing motor finance through normal channels.’
The survey, which closes on 10 August, can be found at: www.gfsc.gg/motor-finance-survey
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