FirstRand to Exit UK Unit Aldermore After $957 Million Car Loan Hit

08 Apr FirstRand to Exit UK Unit Aldermore After $957 Million Car Loan Hit

The bank’s UK exposure—primarily through Aldermore and its vehicle finance arm MotoNovo Finance—has come under pressure after provisions for compensation claims surged to £750 million (around $957 million).
In a notice to shareholders, the South African bank said it would leave its motor finance operations in Britain because it no longer has the “risk appetite” for the UK.

The Financial Conduct Authority (FCA) finalised details of the scheme at the end of March, which FirstRand said were “disproportionate and unfair”.

The terms of the scheme mean FirstRand now expects its compensation bill to hit £750m, up from its previous estimate of £510m.
This compensation is for customers who were sold car finance agreements in which dealers received a fee from lenders based on the interest rate charged on the loans.

The FCA, which banned these agreements in 2021, said these fees were rarely disclosed to customers and provided an incentive for dealers to charge higher interest rates than necessary.FirstRand’s higher payout estimate came as a result of the watchdog’s decision to broaden the scope of what it considered to be an “unfair” loan and changes to the amount of interest on unfair loans that a company would have to pay back to customers. While the group maintains that its capital position remains strong, the pressure on profitability is prompting a reassessment of its UK footprint. The bank noted that continued exposure to the motor finance segment may no longer align with its risk appetite or return thresholds. Related News