FCA probe into motor finance won't be like PPI, regulator says

The head of the Financial Conduct Authority (FCA) has said it is "improbable we will find nothing" as it continues to investigate historical motor finance commission arrangements for potential misconduct, but that the impact on the financial sector will unlikely be as severe as the Payment Protection Insurance mis-selling scandal.

In a speech at the Morgan Stanley European Financials Conference, FCA chief executive Nikhil Rathi tried to talk down comparisons with PPI which led to just short of £50bn being paid out by banks in compensation.

With PPI, Rathi said that the regulator's work took place over "many years" and action on redress "dragged on for some time". However, the FCA's probe into motor finance – following claims that consumers had been over-charged for car loans between 2007 and 2021 – and the fact they it had "intervened early" will likely mitigate the potential impact.

He said the regulator wants to "clarify matters in a more condensed time frame and on a basis that is robust and fair".

The FCA's investigation centres around so-called discretionary commission arrangements or DCAs, through which lenders allowed motor dealers to use their discretion to land on interest rates within a certain range.

"While certainty is not something I can provide today, and I cannot prejudge what we might find, I can say in my view it is improbable we will find nothing to report as we look at historic motor finance sales. Some firms will be better placed than others," Rathi said.

"Equally, I do not anticipate this issue playing out as PPI did, not least because we have intervened early in the interests of market orderliness."

However, he said that where there is the possibility of the need for redress, "we will seek to make that public or encourage firms to do so, as soon and in as much detail as we can. [...] We want to give firms, consumers, the wider market information, and certainty when we can. All in line with our strategy."