Motor Connect director Steve Corwood has warned that the ongoing Financial Conduct Authority (FCA) investigation into the motor finance industry could be as big as the PPI scandal.
Car Dealer reported earlier this month that the FCA is investigating cases of motor finance firms not paying out compensation to customers over now-banned commission arrangements.
The watchdog is using its powers under s166 of the Financial Services and Markets Act 2000 to identify cases of potential wrongdoing by motor finance firms.
In 2021, the FCA banned commission models that gave motor finance brokers and dealers incentive to raise customers’ finance costs.
It made the move after discovering ‘serious concerns’ about the way lenders chose to reward car retailers and other credit brokers.
Last week, we brought you the news that if evidence of ‘widespread misconduct’ is found, then banks could end up paying out as much as £10bn in compensation to customers.
Now, speaking on the latest episode of the Car Dealer Podcast, Corwood expressed concern over how big the issue could get.
He compared it to the PPI scandal of the 2010s, which saw millions of customers win billions of pounds in refunds when banks were proved to have mis-sold payment protection insurance.
The latest investigation recently featured on Martin Lewis’s ITV consumer show and Corwood believes things could soon prove tricky.
He told Podcast hosts, James Baggott and Jon Raey: ‘It was on the Martin Lewis show and he was talking about the compensation around vehicle finance and that you should start now and get your claim processes going in.
‘This is like the next big PPI. I have had conversations with Nick and John at the Compliance Guys surrounding it all and those guys are on top of it.
‘There is going to be a backlog of enquiries coming in now so you’ve got to get your house in order and make sure that if you are going to get asked any questions that your processes are tight.
‘It is pre-2021 that they’re probably going to be looking at because of the rules and regulations but it is still ongoing.
‘It just seems relentless and never ending for car dealers at the minute. People just feel like everything is coming from every angle that’s possible.’
The Car Dealer Podcast, sponsored by JATO, discusses the motor trade’s biggest topics every week.
Among the other subjects debated this week were the Trading Standards warning on Facebook car sellers, the unfolding situation at Lookers and car dealers underpricing their stock on Auto Trader.
You can listen to all episodes of the Car Dealer Podcast on Spotify.