The Financial Conduct Authority has told MPs it may need stronger legal powers to tackle misconduct linked to motor finance compensation claims, signalling that its focus is expanding beyond lenders to the wider claims process.

Speaking before the Treasury Select Committee, FCA Chief Executive Nikhil Rathi said the regulator would use all the powers currently available to it but suggested there are gaps in the existing framework that may require Parliament to act [1].

The comments come as millions of motorists continue following developments in the car finance scandal, with the regulator working to implement its proposed compensation scheme while separately addressing concerns about how some consumers are being supported through the claims process.

FCA highlights concerns over misconduct

During the committee hearing, MPs questioned whether the regulator has sufficient powers to deal with misconduct involving organisations helping consumers pursue compensation.

Rathi said while the FCA has concerns about behaviour it has identified, including alleged forged signatures and other inappropriate conduct, some matters may be beyond the regulator's existing enforcement capabilities.

He told MPs that while the FCA will continue using the powers already available, Parliament may ultimately need to strengthen the legal framework to better protect consumers.

The regulator's comments relate to the conduct of some organisations involved in the claims process rather than the proposed compensation scheme itself.

Focus extends beyond lenders

Much of the public discussion surrounding the FCA car finance review has focused on lenders and the proposed industry wide redress scheme.

However, the latest evidence to Parliament shows the regulator is also paying close attention to the wider compensation market that has developed as increasing numbers of motorists pursue a car finance claim.

The FCA's concern is ensuring consumers receive appropriate protections throughout the claims journey, regardless of how they choose to pursue potential compensation.

The regulator has previously taken action against misleading advertising [2] and has said it will continue monitoring conduct across the sector while considering whether additional statutory powers are needed.

Separate from the compensation scheme

The latest comments do not change the FCA's proposed compensation scheme or the ongoing tribunal proceedings.

Instead, they relate to how consumers are represented while pursuing car finance claims linked to historic commission arrangements.

The regulator's proposed redress programme remains subject to legal challenges, with tribunal hearings expected later this year or early next year [3].

If the scheme is ultimately upheld, the FCA expects firms to compensate eligible consumers under a standardised industry wide process.

What this means for motorists

For consumers affected by alleged car finance mis-selling, the latest comments do not alter the current complaints process.

Motorists who believe they may have entered into mis-sold car finance agreements can still raise concerns with their lender while the legal proceedings continue.

Consumers considering a car finance refund check or a PCP claim check should ensure they understand the options available before deciding how to pursue a complaint and carefully review any agreements they enter into with organisations offering assistance.

The FCA has repeatedly said its priority is ensuring consumers can make informed decisions and are treated fairly throughout the claims process.

Any future car finance compensation will continue to depend on the outcome of the regulator's proposed redress scheme or other legal routes available to consumers.

Likewise, any car finance refund will be determined under the final legal framework once the ongoing proceedings have concluded.

What about PCP agreements?

Many of the finance agreements under review involve PCP car finance, meaning the regulator's comments are also relevant to motorists considering a PCP claim or a PCP compensation claim.

Consumers exploring wider PCP claims or PCP finance claims should be aware that the FCA's latest evidence relates to consumer protections during the PCP car claims process rather than changes to eligibility for compensation.

The regulator has not announced any changes affecting motorists who believe they may have entered into agreements involving mis-sold PCP car finance making them eligible for a PCP refund for their PCP claims.

Parliament may consider further action

The Treasury Select Committee questioned whether the FCA should receive additional statutory powers to oversee misconduct linked to motor finance compensation claims [4].

While no legislative changes have been proposed at this stage, the regulator's comments indicate that discussions around consumer protection could continue as the compensation process develops.

For now, the FCA says it will continue using its existing powers while working with Parliament and other regulators to address any gaps that emerge.

As the UK's response to the car finance scandal continues to evolve, the regulator's latest evidence highlights that its role extends beyond compensation alone. They also want to protect consumers during the on-going claims process.

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References:

1. Speaking before the Treasury Select Committee, FCA Chief Executive Nikhil Rathi said the regulator would use all the powers currently available to it but suggested there are gaps in the existing framework that may require Parliament to act - https://www.thebanker.com/content/c855de6e-9015-4616-8a73-fbddc402ca0e
2. The regulator has previously taken action against misleading advertising - https://www.fca.org.uk/news/press-releases/fca-bans-cmcs-misleading-adverts
3. The regulator's proposed redress programme remains subject to legal challenges, with tribunal hearings expected later this year or early next year - https://www.fca.org.uk/news/statements/motor-finance-scheme-partially-suspended
4. The Treasury Select Committee questioned whether the FCA should receive additional statutory powers to oversee misconduct linked to motor finance compensation claims - https://committees.parliament.uk/event/27858/formal-meeting-oral-evidence-session/