Car finance scandal shows our rotten banks are incapable of change

The FCA’s inquiry, which is expected to last until September, centres on now-banned “discretionary commission arrangements” that allowed brokers and car dealers to make up interest rates to increase their commission. The practice was outlawed in 2021 and regulators must now determine how many customers overpaid after launching an investigation in January.

Even now, the industry’s default reaction is damage limitation – playing down the seriousness of what has happened instead of holding up its hands and confronting the issue head-on.

But that’s precisely what happened with the PPI scandal. The banks initially played it down, and it mushroomed into a £50bn-plus catastrophe. The impact of regulatory crackdowns often tend to be greater than initially thought.

Consumer champion Martin Lewis thinks the scale of car finance mis-selling could be even bigger after his website experienced a deluge of cases through a claim tool it launched at the beginning of February to help customers. Since then, more than a million people have complained – equivalent to 30,000 people a day. Describing the numbers as “staggering”, Lewis says the number of complaints is building up more quickly than during PPI.

Once again, Lloyds finds itself right at the centre through its Black Horse finance arm. Lewis says the banks with the most complaints against their name via his Money Saving Expert site are Black Horse with 16pc, the most so far, and Santander with 8.2pc of the total.

The car industry won’t come out of this well, either. Volkswagen’s finance arm accounts for the second most claims with a 14pc share, while Stellantis, the parent company of Fiat, Peugeot and Citroen, has 8pc, and BMW 7.4pc.

Ford, Mercedes, and Toyota make up 4.3pc, 3.6pc, and 2.5pc respectively – not a great look, either given how many of the major carmakers were eventually implicated in the emissions scandal.

But it’s the banks that stand out by virtue of the sheer number of serious misdeeds they have clocked up since the financial crisis. The FCA’s inquiries stretch as far back as 2007 – that’s potentially 17 years of yet more wrongdoing.

After all the fine words, the billions in payouts, the inquiries, the select committee hearings and the new rules, this latest impropriety shows that our rotten banks have completely failed to get their house in order.