The Financial Conduct Authority's (FCA) top lawyer has admitted that the car finance mis-selling scandal could be as large as the payment protection insurance (PPI) crisis, which cost UK banks £50bn. Stephen Braviner Roman, the FCA's general counsel, told MPs that a recent Court of Appeal ruling has vastly expanded the scope of potential compensation, making it premature to rule out PPI-scale costs.
The landmark ruling in October determined that paying a 'secret' commission to car dealers without disclosing the sum and terms to borrowers was unlawful. This goes beyond the FCA's investigation into discretionary commission arrangements (DCAs), which were banned in 2021. The decision could push compensation costs beyond Moody's estimate of £30bn for lenders including Lloyds, Santander UK, and Close Brothers.
Earlier this year, FCA chief executive Nikhil Rathi played down comparisons to PPI, but the Court of Appeal ruling has changed the landscape. Lenders involved in the case, such as Close Brothers and FirstRand, are appealing to the Supreme Court. PPI, Britain's costliest consumer scandal, saw 64m policies sold and cost the industry £48.5bn in fines and compensation.
Separately, Rathi warned that Chancellor Rachel Reeves' plans to loosen regulation and encourage risk-taking in the City could attract bad actors. Reeves has urged the FCA to prioritise growth and competitiveness, saying post-2008 regulations 'went too far'. However, critics note that Labour's lax regulation was blamed for contributing to the 2008 collapse of Royal Bank of Scotland.
