FirstRand has told shareholders it will not pursue a legal challenge against the UK Financial Conduct Authority’s motor-finance redress scheme, despite reiterating that it regards the scheme as “unfair and disproportionate” and believes there are “legal grounds for challenge”.
The announcement was made on 28 April 2026, after the FCA said the compensation scheme “has been legally challenged”, warning this will delay compensation.
The Independent reported that at least one challenge has been brought by consumer group Consumer Voice, which argues the scheme under-compensates consumers. The Finance and Leasing Association has said it will not challenge the scheme despite having concerns.
In its SENS update, FirstRand said it reached the decision after engaging with “industry bodies and regulators”, and because a challenge without “the participation of a meaningful cohort of other UK lenders” would not be in shareholders’ interests, given the “ongoing uncertainty” litigation would create.
FirstRand’s UK exposure arises through its wholly owned subsidiary Aldermore Group, which comprises Aldermore Bank plc and MotoNovo Finance Limited, the group’s motor-finance business.
The FCA published the final scheme rules on 30 March 2026, describing an industry-wide redress scheme for motor-finance customers treated unfairly between 2007 and 2024. The regulator said it had tightened eligibility and estimated that 12.1 million agreements fall within scope.
The FCA estimates that firms will pay £7.5 billion in redress, with a total industry cost of about £9.1bn once operational and administrative costs are included. It also set implementation deadlines of 30 June 2026 for agreements entered from 1 April 2014, and 31 August 2026 for earlier agreements.
The FCA’s redress scheme came after the UK Supreme Court’s judgment on 1 August 2025 in the conjoined appeals of Hopcraft, Johnson and Wrench, which examined lender-paid commission to motor dealers where the commission was not disclosed or only partly disclosed to customers.
The Supreme Court rejected the customers’ tort and equity claims (including bribery/fiduciary-duty theories) in those cases but held that Mr Johnson succeeded under the “unfair relationship” provisions of the Consumer Credit Act, emphasising that the unfairness assessment is highly fact-sensitive.
£750m provision … and objections to the FCA’s methodology
In a SENS on 7 April 2026, FirstRand said it had completed a comprehensive assessment of the final rules and concluded that the financial impact would be “above the group’s expectations”.
It announced a further £510 million pre-tax accounting provision, taking the total provision for the UK motor-finance commission matter to £750m. FirstRand compared this amount with the £275m profit it said the group had generated from UK motor-finance activities over more than a decade.
In the same statement, FirstRand set out its objections to aspects of the FCA’s scheme design, including its view that the regulator treated certain commission-related factors as standalone indicators of unfairness, and the redress calculation was not loss-based. It also highlighted the introduction of a minimum 3% interest floor, which it said materially increased expected costs.
Later on 7 April, FirstRand issued a correction SENS relating to its earnings guidance. The corrected statement said full-year normalised earnings, after the motor-finance provision, were expected to contract by 4% to 9%, with return on equity at or just below the bottom end of the group’s stated range.
FirstRand linked the increased provision directly to MotoNovo’s capital requirements and to its ownership of Aldermore Group.
FirstRand said that, given the size of the provision required to meet the FCA scheme, MotoNovo would require further recapitalisation from FirstRand’s existing UK resources. It warned this could severely constrain capital available for UK motor-finance lending, meaning capital would not be available to fund growth in the MotoNovo business.
The group said this would have a negative impact on its excess capital position, while also stating that FirstRand Limited, FirstRand Bank Limited, and Aldermore Group all remained above their targeted capital ratios.
On strategy, FirstRand described Aldermore as “a resilient and sustainable business serving an important need in the UK market” but concluded that “the UK as a consumer finance jurisdiction will not deliver the returns the group requires”.
It therefore said the business case for FirstRand to own and operate a UK consumer finance entity was “not within the group’s risk appetite”, and it would work with Aldermore’s board and regulators to facilitate an orderly ownership transition.
