Insights / Crisis & reputation
Settle or fight: the decision that sets a regulator-driven crisis
Car finance lenders are about to make the decision that sets everything else in a regulator-driven crisis: settle and control the story, or fight and let the story control them.
The FCA has put a redress scheme on the table, roughly £9.1bn. The carmakers' lending arms are weighing whether to accept it or challenge it through the courts. The regulator has been blunt about the maths. Reject the scheme, fight complaint by complaint, and it costs something like £6bn more, with payouts dragging out to 2027.
I have been in that room before
In the years after BCCI collapsed, the liquidators came after the Bin Mahfouz family for claims that ran to around $10.5 billion. Every instinct, and a good deal of the legal advice, pointed toward fighting it to the bitter end. The family name had been built over generations. The temptation to defend it line by line, court by court, was enormous.
They chose differently. They chose to stabilise the narrative and settle, on terms they could live with, rather than spend a decade as the defendant in a story written by other people. The reputation survived. The coverage, in the end, was fair, including in the Financial Times. The version of events where they fought everything and won nothing but headlines never happened.
The decision is a judgment, not a legal calculation
Here is the part that lenders weighing the FCA scheme may not want to hear. The decision that sets the reputational trajectory is not a legal calculation. It is a judgment call, and it is made in the first few weeks, long before the lawyers have finished modelling the downside.
Fight, and you hand the story to the regulator, the claims firms and the press for as long as the fight runs. You become the institution that made customers wait until 2027. Settle, and you keep some say over how the chapter reads.
The cost of a crisis is rarely set by who is right. It is set by who decides, early, to take hold of the story rather than wait to see how others tell it. The institution that works that out in the first 48 hours pays the lower bill. The one that works it out in year three pays for the delay as well.
Common questions
What decides the cost of a regulator-driven crisis?
Not who is right, but who decides early to take hold of the story. The reputational trajectory is set by a judgment made in the first few weeks. The institution that works that out in the first 48 hours pays the lower bill.
Should a company settle or fight a regulator?
It is a judgment call, not a legal calculation. Fighting hands the story to the regulator, claims firms and press for as long as the fight runs. Settling keeps some say over how the chapter reads.
Tim Sutton is a senior reputational adviser to boards in their hardest moments. timsuttonpr.com · LinkedIn