20th Oct 2025 11:04
(Alliance News) - Secure Trust Bank PLC on Monday said it expects to increase its motor finance redress commission provision by around GBP16 million to a total of GBP21 million.
The Solihull, England-based business and consumer lender said the impact based on the consultation paper published by the UK Financial Conduct Authority is "towards the extreme end" of previously expected outcomes.
Earlier this month, the FCA said car finance mis-selling will cost providers around GBP8.2 billion, with an additional GBP2.8 billion of administrative costs, taking the total to GBP11 billion.
The UK regulator said its investigation had found "widespread failures to adequately disclose the existence and nature of commission and contractual ties between lenders and brokers," which led some customers to overpay on car loans.
Under the proposed redress scheme, customers may be entitled to compensation if their car finance agreements involved discretionary commission arrangements, where dealers could increase interest rates to boost their commission, or where commission exceeded 35% of the total cost of credit or 10% of the loan value.
Secure Trust Bank expects to increase its provision by GBP16 million to GBP21 million, made up of GBP16 million redress and GBP5 million costs.
If the FCA scheme was implemented entirely in its current form, Secure Trust Bank said it would expect to increase the provision by a further GBP6 million.
On a pro forma basis, Secure Trust Bank had a common equity tier one ratio of 13.3% at the end of September.
It estimated that the additional expected provision of GBP16 million will reduce the CET1 ratio by 50 basis points to 12.8%, above the regulatory requirement of 9.6%.
The bank said it has been capital accretive throughout the year and expects to continue to be capital accretive in the fourth quarter, on an underlying basis.
Secure Trust Bank said the FCA's proposed approach for assessing unfairness is "not aligned" with the UK Supreme Court judgement.
It said the judgement ruled that the test for unfairness is "highly fact specific and must take into account all relevant factors".
The bank noted that it did not have commercial ties in the form of contractual rights of exclusivity or first refusal to provide vehicle finance.
Secure Trust Bank said it made "limited use" of discretionary commission arrangements and believes it used them "as a means of reducing its rates in competition with other lenders to provide its customers with competitive finance, and not to harm them".
It said it stopped using discretionary commission arrangements in June 2017, ahead of their ban in 2021.
"STB will continue to engage constructively with the FCA and others on these and additional points," the firm said.
The company noted that the ultimate cost could vary from its estimated provision as there remains uncertainty on the final rules of the redress scheme.
Shares in Secure Trust Bank were down 5.2% at 838.00 pence in London on Monday morning.
By Michael Hennessey, Alliance News reporter
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