FCA Investigation

The investigation is focused on salespeople overcharging customers for their finance deal to earn inflated commissions from car finance firms and banks, going back to 2009

The report is expected to be hard-hitting

Media speculation is currently concentrating on the size of the compensation claims arising from it.

The Times has warned claims may reach £50bn.

Martin Lewis suggests they will be on the same scale as the PPI scandal.

One claims management firm advertises average claims to be in excess of £5,000 and totalling £16bn.

In the worst scenario, some companies may struggle to meet the claims, as consumer credit companies did when their industry recently faced claims of mis-selling.

It’s not just about the money, though; the media is expected to have a field day as it did during the PPI scandal and will look to appoint blame.

FCA findings are expected to highlight weak car finance operations and management.

Increased regulation is likely

Risk models are likely to be required to be strengthened:

Car finance firms may have to incorporate more Risk into their strategies, policies, plans and processes.

They may have to establish more effective Risk sub-committees at Board, recruit or train Chief Risk Officers and Risk staff to build, implement, monitor and report Risk.

Sales funnels will suffer if it becomes more difficult to qualify for a loan through, for example, the introduction of more stringent affordability calculations.

There may be serious reputational damage to some brands

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OEMS will suffer

All companies within the automotive industry should prepare a robust, effective, pre-prepared risk mitigation plan in place for when the Report is published.

Distancing themselves from miscreant car finance companies may become a priority for some OEMs.

OEMs will bear the brunt of the media backlash as most people walking into a dealership believe they are buying from the manufacturer.

Sales funnels are likely to suffer.