Financial Conduct Authority (FCA) chief executive Nikhil Rathi joined Martin Lewis’ Money Show to address shortcomings about the regulator, as well complaints against car finance lenders.
The show was broadcast at 8pm on ITV on December 10 and Rathi joined on stage to make clarifications and address some questions from viewers, as well as Lewis directly.
The national television attention to the subject will bring even greater focus to the topic and follows on not only from the FCA’s investigation on discretionary commission arrangements (DCA), but also the shock ruling from the Court of Appeal in October, which determined that motor finance brokers must provide full disclosure on commissions when arranging car loans.
Lewis applauded Rathi, as did the audience, for agreeing to answer questions live on the show.
Lewis also said the case could run up to a cost of £30 billion and car owners could be looking at an average compensation claim of up to £1,100 each.
Should the FCA take responsibility on comission disclosure?
However, Lewis did ask whether this Court of Appeal ruling calls into question the FCA’s own rules at the time.
Lewis said on the show: “In relation to comission disclosure, firms haven’t breached the regulator rules that were in place.
“Now they’re being told they’re acting illegally by the Court of Appeal. Is some of the responsibility not the FCAs?
“Were your rules good enough?”
Rathi responded: “We banned DCA in 2021. The court has been looking at common law and that’s the area that is disputed around comission disclosure.
“We’ll have to see what the Supreme Court says. Our rules work alongside the law, we don’t decide what the law is.”
Lewis also asked if the result of this latest ruling on comisson disclosure, as well as the investigation into DCA will have a knock-on impact to make car finance more expensive for all as a result of potential compensation claims running into the billions.
Rathi said: “Some of that will depend on where the courts get to.
“But we have to get to a point where the car market is functional car finance is still affordable for millions of people each year.
“That’s why we want to gather information and see where we are.”
Lewis went into detail about how customers can go about complaining to car finance firms about DCA, as well as about comission disclosure.
His advice, if a customer has been affected by DCA, is to start with that and then the additional comission disclosure element will be folded into the same complaint.
For those that don’t have a DCA, Lewis said it was up to the individual to decide if they feel like they didn’t get good value, despite not knowing the full amount of comission a dealership may have made.
Rathi agreed: “If you’re satisfied with the finance deal, we’re not suggesting you should complain about comission disclosure.
“However, if you do have a complaint with it, you should go ahead and complain.”
The FCA has paused complaints in relation to DCAs until December 4, 2025. Customers can still put their complaint in, but firms don’t need to respond until the FCA has decided how it’s going to deal with new guidance, as well as a potential redress scheme for consumers.
This is to give the regulator more time to tackle the issue and as Rathi mentioned in the Martin Lewis show, it needs to look at all the evidence and take into account any legal rulings, before it can determine a response.
The FCA now hopes to set our the next steps of its review in May 2025, which is likely to be specific steps to deal with DCA complaints and might even include the launch of a consumer redress scheme.
The regulator was in the news further recently when a damning MP report said the FCA is ‘widely seen as incompetent’.
An FCA spokesperson told AM: “We sympathise with those who have lost out as a result of wrongdoing in financial services, however we strongly reject the characterisation of the organisation.
“We have learned from historic issues and transformed as an organisation so we can deliver for consumers, the market and the wider economy.”
