How the motor finance scandal exposed data and RRC skill gaps

A guest editorial by Yves Laffont, sector lead, Financial Crime Consulting Services at FDM Group

The pending verdict in the motor finance mis-selling scandal has sent shockwaves through the financial services sector, with billions in compensation claims now on the table. Beyond the immediate financial fallout, the scandal has exposed deeper, systemic failures, notably widespread gaps in data governance and Regulatory, Risk and Compliance (RRC) capabilities.

As investigators comb through years of poorly managed records, it’s become clear that many firms were simply not equipped to handle the scale, complexity or risk embedded in their operations. This isn’t just a case of mis-sold products, it’s a stark warning that without a robust data strategy and embedded RRC expertise, organisations remain dangerously vulnerable to both regulatory action and reputational damage.

Strengthening internal capabilities through targeted skills development and cross-functional training in the wake of such scandals is essential. Investment in RRC upskilling can help close critical gaps and future-proof firms against mounting regulatory pressures.

The data challenge

At the heart of the scandal lies a problem that should have been addressed long ago: poor data hygiene. Incomplete and disorganised loan records have made it near impossible for businesses to accurately trace customer histories, verify compliance or mount a coherent defence. Disorganised, incomplete, and low-quality loan records have made it difficult—if not impossible—for many firms to accurately trace customer histories, verify compliance, or mount a coherent defence.

In some cases, basic contract data was missing or inaccurate. In others, systems hadn’t been updated in years, leaving institutions reliant on fragmented information stored across multiple platforms. As regulators comb through years of paperwork and digital records, this lack of clarity is proving to be a significant liability.

Now, financial firms are under intense pressure to get their houses in order. Effective data cleaning, standardisation, and auditing practices are no longer optional—they’re essential. However, addressing these challenges retroactively is expensive and time-consuming. The better strategy would have been to build strong data foundations, underpinned by the right skills and training, in the first place.

The skills gap

The data issues revealed in the motor finance scandal discerned a broader talent and skills gap. Many institutions lack the expertise to manage large-scale data operations or to navigate complex regulatory environments effectively. Data analysts, regulatory specialists and compliance professionals have become critical hires overnight, but the supply can’t keep up with the increasing demand.

The issue here is ongoing as for many years, the financial sector has underinvested in roles that fall outside of traditional profit centres. While front-office teams have expanded, back-office functions like compliance, risk management, and data governance have often been deprioritised.

Regulatory and risk experts aren’t just box-tickers—they’re strategic assets. In a highly regulated environment, these professionals ensure that products are sold fairly, data is handled properly, and institutions stay within the bounds of the law. Without them, businesses may find themselves in deep waters, as the current scandal has shown.

Ultimate skills

While the immediate financial fallout is significant, the long-term consequences of the motor finance scandal may be even more damaging. Public trust in financial services, which is at best, fragile, continues to falter and has now taken another significant hit, with financial and reputational recovery for the firms involved potentially taking years.

In an era where customers are increasingly values-driven, a damaged reputation can have direct consequences on market share. Trust is not easily rebuilt, and competitors who can demonstrate better governance and transparency are likely to benefit from the shift. 

Moreover, regulatory scrutiny is expected to increase. Firms that fail to demonstrate robust compliance and data management processes may find themselves subject to additional oversight, audits, and even penalties. In a crowded market, falling behind in these areas is not just inconvenient—it’s a threat to long-term competitiveness.

The opportunity – upskilling

Amid the chaos, there is a clear opportunity to use the fallout of the motor finance scandal as a springboard for forward-thinking in RRC capabilities. Investing wisely in data and RRC training now means firms can both address current shortcomings while setting themselves up for future success.

Upskilling existing employees in areas like data analytics, regulatory compliance, and risk management is a smart, cost-effective way to close the talent gap and also helps to build a culture of accountability and continuous growth and development. Better data practices lead to better decision making and the cleaner, better structured the data, the faster and more accurate the subsequent forecasting. Over time, this means smoother compliance checks, better operational efficiency and stronger customer relationships.  

Firms that treat the motor finance scandal as a turning point will ultimately emerge stronger and will be better prepared to manage risk, making themselves far more resilient in the face of future regulatory challenges.

Turning crisis into catalyst

The motor finance scandal, while a cautionary tale, can also serve as a catalyst for upskilling in data management and RRC skills gaps. The dangers of overlooking data quality and compliance expertise can be fatal to firms and important lessons need to be taken from this and these issues need to be addressed head on.

Financial services firms can take action now. By cleaning up data, investing in skills, and embedding RRC thinking throughout their organisations, they have a chance to do more than recover. They can lead. And in doing so, they can help rebuild trust in an industry that badly needs it.

Image: FDM Group

Guest Editorial This article was produced specially for Fintech Intel by an expert guest contributor.