"At the centre of the scandal are "discretionary commission arrangements" (DCAs) - hidden incentives paid by lenders to car dealers for arranging vehicle loans. Under the model, which was in place for more than a decade, dealers could set the interest rate charged to buyers, often inflating borrowing costs to earn larger commissions. The FCA banned the practice in 2021 but is investigating deals dating back as far as 2007."
"Vauxhall and Peugeot's parent company Stellantis has earmarked £37 million to cover potential claims linked to the mis-selling scandal sweeping the car finance industry - a crisis regulators warn could cost lenders as much as £18 billion. The provision, revealed in accounts filed by Stellantis Financial Services UK, highlights the growing financial fallout from the motor finance review launched by the Financial Conduct Authority (FCA)."
Stellantis has set aside £37 million in accounts for potential customer claims arising from widespread mis-selling in car finance linked to discretionary commission arrangements (DCAs). DCAs allowed dealers to inflate interest rates to increase commission; the FCA banned the practice in 2021 and is investigating contracts potentially back to 2007. The regulator estimates 14.6 million contracts involved DCAs and warns a large portion may be unlawful. The FCA is preparing a mandatory, industry-wide compensation scheme that analysts compare to the £50 billion PPI redress; payouts are expected to begin next year, and major lenders have already made sizeable provisions.
Read at Business Matters
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