FirstRand’s UK motor finance company MotoNovo has resumed new business origination after a temporary halt while it updated its processes in response to an investigation by authorities on commissions paid to dealers.
MotoNovo’s update followed a decision by a UK court last week which ruled in favour of consumers in a matter involving FirstRand and Close Brothers.
FirstRand, SA’s most valuable banking group, said on Wednesday that MotoNovo had resumed writing new business after making the necessary operational adjustments in compliance with the new legal requirements.
“MotoNovo has adapted its systems to facilitate the disclosure of the amount of commission relating to each finance agreement and obtain informed consent from all customers to any commission paid by MotoNovo to the motor dealer before proceeding with the finance agreement,” the group said.
“In addition, MotoNovo has communicated to all dealers and motor finance brokers that it has relationships with of their separate and continued obligations to comply with the law and regulations, and their responsibilities to implement any necessary changes.
“MotoNovo has put in place a thorough process to assess that all dealers and motor finance brokers comply. While these actions have been taken to ensure that MotoNovo can resume operations and service the needs of its customers, FirstRand continues to proceed with the legal process to appeal against the Court of Appeal judgment to the UK Supreme Court as the group disagrees with its findings.”
The mooted appeal will see FirstRand fork out more in legal fees, which have already breached the R300m mark.
The group has already made a provision of R3bn in possible penalties in the Financial Conduct Authority (FCA) investigation regarding dealer commissions in the motor finance sector in the UK.
Another SA bank caught up in the sweeping investigations by the FCA is Investec. The Anglo-SA niche banking and wealth management group has also set aside £30m for potential compensation and other costs related to the FCA probe.
The FCA is perusing thousands of records spanning 14 years, trying to figure out how the DCAs affected the cost of credit for people borrowing money to buy a vehicle in the UK.
The watchdog in 2021 banned the discretionary commission arrangements, after a review, saying it would collectively save customers about £165m a year.
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