A powerful cross-party committee of MPs has delivered a blistering condemnation of the City watchdog, accusing it of 'nakedly siding with lenders' in its handling of the escalating car finance mis-selling scandal.
The Treasury Select Committee has raised serious concerns about the Financial Conduct Authority's proposed compensation scheme, suggesting it appears designed to 'minimise the redress paid by lenders' rather than ensuring fair outcomes for potentially millions of affected consumers.
What's Behind the Controversy?
The dispute centres around discretionary commission arrangements that were banned in 2021. These arrangements allowed car dealers to increase interest rates on finance deals, earning them higher commissions without consumers' knowledge.
Despite the FCA's investigation revealing widespread misconduct across the industry, MPs argue the proposed redress scheme fails to deliver meaningful justice. The committee's intervention suggests the regulator is prioritising financial stability and lender interests over consumer protection.
Mounting Pressure on Regulators
The Treasury Committee's unusually strong language indicates growing parliamentary frustration with financial regulators. MPs have demanded:
- Transparency about how compensation amounts are calculated
- Clear justification for the proposed scheme's structure
- Evidence that consumer interests are being properly protected
This confrontation comes as the financial services sector faces one of its largest potential compensation bills since the PPI scandal, with estimates suggesting the final cost could reach billions of pounds.
What Happens Next?
The FCA now faces increasing pressure to revise its approach or provide compelling evidence that its current plan represents the fairest outcome for consumers. With millions of drivers potentially affected by historical mis-selling, the political stakes continue to rise.
This developing situation raises fundamental questions about the balance between protecting financial institutions and ensuring accountability when consumers are wronged.
