Scale: this was not a niche compliance hiccup

On the FCA’s own numbers, the affected population runs to tens of millions of motor finance agreements since April 2007, with a very substantial proportion likely to be assessed as unfair, even under the regulator’s tests. That is systemic by any measure.

The redress model: conflicted, complex, and too cheap

The APPG is clear: the FCA’s proposed scheme, as drafted, is not fit for purpose. It falls short on fairness, transparency, independence and timeliness. It lets lenders act as judge and jury, deploy subjective rebuttals, and keep the key documents — forcing consumers to climb steep evidential hills that the wrongdoers themselves control. That is not an independent system; it is a self-policed rerun of what went wrong with earlier mis-selling schemes.

On quantum, the FCA’s “blended” methodology (repaying some commission plus a modelled loss) drags awards well below court, and even FOS benchmarks, before the scheme’s ridiculously low compensatory interest is even applied. In the FCA’s own worked examples, outcomes that would score materially higher under court/FOS comparators are cut down under the scheme’s model.

The proposed compensatory interest is set at a blended rate far below the long-standing 8% simple benchmark used by courts and the Ombudsman. That choice alone removes billions from consumers. Calling that “proportionate” simply privileges sector balance sheets over restitution.

The result is perverse: on the APPG’s figures, lenders could pay out £8.2bn against the excess profits of £15.6bn from the mis-selling — emerging £7.4bn in pocket even after redress. That is a green light to mis-sell again, and this is what will happen.

The truth about “no harm”

The claim that consumers weren’t harmed — or that you must look at the “whole package” (car mats and paint protection included) — withers under the report’s facts. Consumers were misled, loans were overpriced, and vulnerability correlated with harsher outcomes. The law does let decision-makers take a broad view, but the evidence of detriment is now overwhelming.

Industry doom-mongering hasn’t stood up

When senior executives warned that compensating victims would make the UK “uninvestable,” they produced no cogent economic analysis whatsoever. Markets barely flinched even as provisions rose. The rhetoric doesn’t match reality.

How we got here: a decade of slow walking

The FCA concluded years ago there was a real problem and eventually banned discretionary commission arrangements (DCAs) in 2021 — but only after years and years of consumer harm, and five long years after it was brought to its attention by a whistleblower. The dither and delay pushed many victims towards a limitation cliff-edge, repeating mistakes seen in earlier redress episodes.

Meanwhile, the heart of the wrongdoing — non-disclosure — is not in dispute. In large samples of DCA files, disclosure to consumers never happened. That is the culture the courts and Parliament have now had to address.

Why this matters — and why GAP insurance is next

The APPG situates motor finance alongside PPI: different products, same pattern — opaque commissions, conflicted distribution, and mass detriment. Many of the same firms are involved; the playbook is familiar.

That’s precisely why GAP insurance — routinely sold alongside finance and often embedded or lender-financed — demands scrutiny. The same sales environment that tolerated discretionary rate-setting, undisclosed commissions and “dealer-first” incentives in finance also nurtures mis-selling risks for add-ons like GAP. Once you accept that a vast share of finance agreements failed basic fairness tests — with non-disclosure as a central vice — it becomes untenable to pretend GAP was insulated from the culture that produced those outcomes.

What a credible fix must include

• Independence: remove lender control over eligibility and rebuttals. Use an arms-length body or tribunal model.
• Transparency: publish key supervisory findings and explain how industry lobbying shaped the methodology.
• Full restitution: align quantum with court/FOS comparators and restore a meaningful compensatory interest rate, not a token blend.
• Deterrence: issue headline grabbing substantial fines to lenders involved to deter future mis-selling.
• Access to representation: stop nudging consumers away from legal/CMC support while firms marshal in-house teams and hold the documents.

Bottom line

The industry narrative is collapsing. The APPG has documented a scandal of historic scale, identified why the current scheme under-compensates and fails the independence test, and shown how familiar tactics — “no harm,” economic alarmism, and procedural friction — are being redeployed. With GAP insurance sales intertwined with this ecosystem, the next scandal is not speculative; it’s predictable and it is happening. The only way to restore confidence is an independent, transparent, consumer-first redress model that pays what was taken — with interest that actually compensates.