Some motorists could lose out on compensation from the car finance compensation scheme after a lender collapsed, drawing criticism from a leading MP.
Around 12.1 million car finance agreements are believed to be eligible for compensation through the Financial Conduct Authority’s redress scheme.
The average redress per agreement could see drivers receive £829, with the whole scheme expected to cost £9.1billion, although some drivers may now lose out on compensation.
Blue Motor Finance collapsed into administration earlier this year with a £50million bill for redress claims relating to the mis-selling scandal, The Telegraph reported.
Since then, it was acquired by Hodge Bank, although the pre-pack administration deal meant Hodge Bank would not take on the redress claims.
Blue Motor Finance entered into administration at the end of July, resulting in Simon Edel, Alan Hudson and Richard Barker being appointed to act as “Joint Administrators”.
It confirmed that a sale of the business and a majority of its assets were completed in a deal with Hodge Bank.
A statement from Blue Motor Finance outlined that the business was continuing to operate under the same name, but with new ownership.
Some drivers could miss out on compensation from the car finance scandal
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It involved BMF’s “full origination and servicing platform”, while any loans are unaffected, urging drivers to continue paying as normal.
In response to the sale, Bobby Dean, who sits on the Treasury Select Committee, called it a “get-out-of-jail-free card”.
The Liberal Democrat MP for Carshalton and Wallington said the FCA should be protecting consumers who were ripped off by the car finance mis-selling scandal.
He said it was “disgraceful” that firms were exploiting legal loopholes to avoid paying compensation, warning that it could set a dangerous precedent.
Around 12.1 million agreements are eligible for the car finance scandal redress scheme
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A spokesperson for the FCA said: “We recognise Blue Motor’s customers will be disappointed they’re unlikely to receive all the compensation they’re owed.
“Blue Motor had been in serious financial difficulties for some time. Without this deal, it was much less likely any compensation would be paid.
“Lenders and their directors are responsible for ensuring they can meet their financial responsibilities. We would take a very dim view of any that tried to shirk them.”
Richard Saulet, chief executive of Hodge Bank, said the pre-pack process was the most suitable way to continue the operations of Blue Motor Finance.
He added that the deal would also protect jobs and ensure that customers are still supported throughout the process.
“Importantly, this structure also maximises the value available to be distributed to redress claimants, delivering a better outcome than would otherwise have been possible,” Mr Saulet said.