Industry Spotlight: Motor Finance & Discretionary Commission Agreements - Leveraging Data & AI for a Bold Remediation Response

BS - Ben Saunders & DR - Dan Richards

Introducing Industry Spotlight:

Industry Spotlight is a thought leadership series that brings together industry experts, technology leaders, and practitioners to explore complex business challenges and innovative solutions. Through in-depth interviews and analysis, we examine how organisations can leverage modern technology approaches to address critical industry issues.

In this inaugural edition of Industry Spotlight, we explore the evolving landscape of financial remediation through the lens of financial regulation expert Dan Richards who has steered major Tier 1 UK banks through multiple remediation & rectifications, notably the Payment Protection Insurance (PPI) crisis and is now helping firms prepare for the FCA's review of Discretionary Commission Arrangements (DCA) in motor finance.

Our interview with Dan bridges the gap between past challenges and future solutions, demonstrating how modern approaches to data, digital services, and artificial intelligence can transform remediation programs. While PPI remediation often relied on manual processes and reactive strategies, our expert reveals how firms can leverage cutting-edge technology, harmonised with effective programme governance to create more efficient, cost-effective, and customer-centric solutions for DCA remediation.

BS-Q1: "For our readers, could you explain what Discretionary Commission Arrangements (DCAs) in motor finance are, how they worked in practice, and why they've become a regulatory concern? How does this compare to the fundamental issues that were at the heart of PPI?"

DR-A1: "DCAs were arrangements that allowed car dealers and brokers to adjust customer interest rates at their discretion, with their commission typically increasing with the interest rate. While this practice wasn't inherently wrong, the concern is that customers weren't aware of this discretion and may have paid more than necessary for their finances.

The parallel with PPI is interesting - both involve potential customer detriment through lack of transparency. However, DCA is more complex because the harm isn't from an add-on product like PPI, but rather from the core pricing mechanism itself. This means the evidence gathering and calculation of customer detriment will be significantly more nuanced.

What's particularly challenging is that while PPI redress was relatively binary - you either paid  it or you didn't - DCAs redress is likely to require us to determine what interest rate would have been fair in each case. This is why the FCA's guidance will be crucial for establishing a consistent industry approach."

BS-Q2: "Having been through the PPI remediation challenge, what parallels do you see with the emerging DCA motor finance review, and what key lessons from PPI should firms be applying now to prepare for potential mass remediation?"

DR-A2: "The key lesson from PPI was that early preparation is absolutely critical. With PPI, many firms initially underestimated the scale of the challenge and had to scale up rapidly, leading to inefficiencies and increased costs. For DCA, firms should be using this pause period productively.

From my experience leading PPI programs, I'd recommend three immediate actions. First, start your data discovery now - understand where your historical records are, what format they're in, and what gaps exist. We learned from PPI that reconstructing historical data retrospectively is exponentially more expensive than early preparation.

Second, begin mapping your end-to-end complaint handling process, but design it to be flexible. With PPI, we had to rebuild our processes multiple times as regulatory requirements evolved. This time around, together with WeBuild-AI and Roundturn Partners they are guiding firms to create modular workflows, using AI agents, that can be quickly adapted based on the FCA's final position.

Third, invest in digital infrastructure early. During PPI, we were essentially building the plane while flying it, which led to a lot of manual workarounds. For DCA, firms have an opportunity to implement automated solutions from the start. This should include things like dedicated online portals, mobile customer channels and automated triage systems that can scale up once the FCA confirms its approach."

BS-Q3: "The FCA notes that firms are struggling with historical data access and fragmented systems between lenders and brokers. How does this compare to data challenges faced during PPI, and how can modern data integration tools and AI help firms better prepare for and manage this complexity?"

DR-A3: "The data challenge with DCA is arguably more complex than PPI because we're dealing with multiple parties - the lender, the broker, and sometimes multiple intermediaries. During PPI, most firms at least had all their data in-house, even if it wasn't easily accessible.

WeBuild-AI are addressing this challenge through a combination of approaches. They've developed AI-powered data extraction tools that can pull information from scanned documents and legacy systems. This is particularly useful for older contracts that might only exist as PDFs or even microfilm.

However, technology isn't a silver bullet. 

For firms just starting this journey, I'd recommend beginning with a comprehensive data mapping exercise. Understand where your data sits, who owns it, and what format it's in. Then, pilot your data extraction and integration tools on a small scale before rolling out widely. We learned during PPI that rushing to scale without proper testing often leads to costly and complex rework down the line”.

BS-Q4: "PPI remediation saw significant operational costs and resource challenges. With the FCA potentially announcing a redress scheme in May 2025, how can firms leverage technology and automated workflows to create more efficient and cost-effective remediation processes while maintaining regulatory compliance?"

DR-A4: "Having led both technology and operational work streams during PPI, I can tell you that the key to managing costs isn't just about automation - it's about intelligent automation deployed at the right points in your process. Roundturn Partners think about workflow differently and focus more on governing processes to enable operational excellence. Ensuring workflows are well defined without imposing specific solutions is key. This approach bridges legacy and emerging technologies and supports seamless end-to-end control without the need for costly integrations.

One concrete example: during PPI, we had teams manually reviewing customer correspondence for key information. Now, we can use natural language processing to automatically extract relevant details and automated workflows to flag high-priority cases. But - and this is crucial - we maintain human review for complex cases or where there's uncertainty. This balanced approach keeps both our regulators and auditors happy.

BS-Q5: "The motor finance market serves over 2 million consumers annually, and complaints handling is paused until December 2025. How can firms use this time to implement proactive customer engagement strategies and digital solutions that avoid the communication bottlenecks experienced during PPI?"

DR-A5: "This pause is a golden opportunity that we didn't have the luxury of with PPI. Firms need to use this period to build a 'digital-first, but not digital-only' approach to customer engagement.

This might include steps like launching a secure customer portal that allows customers to check their eligibility and submit complaints digitally. But here's what we learned from PPI - you need to make these systems inclusive. So, while we have chatbots managing routine queries, it’s imperative to maintain phone support for customers who prefer it or need additional assistance.

During PPI, we were often fighting fires, trying to retrofit solutions onto legacy systems and processes. Today, firms have a unique window of opportunity before the FCA's May 2025 announcement to lay proper foundations. The firms that will manage DCA remediation most successfully will be those that embrace an integrated approach to work flow, data, digital, and AI from the start.

BS-Q6: "Finally, Dan, given your extensive experience with PPI and your insights into the emerging DCA challenge, what advice would you give to firms who are just starting to think about their remediation approach?”

DR-A6: "My key message is simple - remediation programs today have an opportunity that wasn't available during PPI. The combination of modern data analytics, digital platforms, and AI capabilities means firms can build smarter, more efficient, and more customer-centric solutions from the ground up.

During PPI, we were often fighting fires, trying to retrofit solutions onto legacy processes. Today, firms have a unique window of opportunity before the FCA's May 2025 announcement to lay proper foundations. The firms that will handle DCA remediation most successfully will be those that embrace an integrated approach to data, digital, and AI from the start.

But - and this is crucial - technology alone isn't the answer. Success requires bringing together the right mix of regulatory expertise, operational experience, and technical capabilities. That's why I'm excited about the next Industry Spotlight piece, where Ben Saunders from WeBuild-AI will be taking a deep dive into how these technologies can be practically implemented in a remediation context using AI, autonomous agents and the public cloud."

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Thank you for joining us for this inaugural edition of WeBuild-AI’s Industry Spotlight in association Round Turn Partners. Dan's insights into the evolution from PPI to DCA remediation highlight the transformative potential of modern technology in addressing complex regulatory challenges.

Our next Industry Spotlight will delve deeper into the technical architecture and practical implementation of AI-powered remediation solutions. We'll explore how firms can build scalable, efficient, and compliant systems that set new standards for customer service control operational costs, whilst unlocking the future potential to monetise their data assets created during the DCA remediation effort.