In addition to ripping off drivers, the scandal engulfed lenders such as Lloyds Bank, Santander, Barclays and Close Brothers, raising fears of a PPI compensation bill of up to £30 billion.

Stephen Haddrill, chairman of the Finance & Leasing Association, which represents hundreds of car finance lenders, said the FCA had failed in its duty to protect consumers by not requiring dealers to disclose that they were paid by banks.

“In terms of secrecy, if it is so obviously right (to disclose), then why has the FCA allowed this to continue?” he told a House of Lords committee on Wednesday.

“I think it’s a failure. It would have been much better if this disclosure had been made.

Lord Grabiner, the barrister on the Lords committee, said he did not understand why the FCA had failed to ban all forms of commissions between lenders and dealers in 2020.

He was also left perplexed by the FCA’s failure to require lenders to disclose commission payments to motorists.

“What I don’t understand is how the FCA could not have concluded that this was detrimental to the consumer’s position if the broker or dealer had the right to conceal the fact that a second separate commission was won,” he said. said.

Growing questions over the FCA’s decision-making risk putting further pressure on embattled Rathi, who is facing growing criticism over his management of the body.