- By Chris Newlands
- Business reporter, BBC News
Image source, Getty Images
The UK’s financial watchdog has warned motor finance firms to hold back cash for potential payouts as it continues an investigation into the sector.
The Financial Conduct Authority (FCA) also revealed that firms “are struggling to promptly provide” data for the probe.
About 17,000 people have made already made complaints to an ombudsman.
The cases surround commission arrangements between lenders and car dealers.
Some lenders had allowed dealers to adjust interest rates, which would improve the commission they received.
As a result, these arrangements created an incentive for brokers to increase how much people were charged for their car loan.
In 2021, the FCA banned these discretionary commission arrangements, following a review, claiming it would collectively save drivers £165m a year, or about £100-£200 on a loan.
The potential cost of compensation has raised some comparisons to the amount paid out during the payment protection insurance (PPI) mis-selling scandal, which cost banks tens of billions of…
