Banks were rocked by the Payment Protection Insurance (PPI) scandal during the early 2000s – and it seems another crisis is on the horizon.

The Financial Conduct Authority (FCA) started an investigation in January into the potential misselling of car loans between 2007 and 2021.

The watchdog’s probe has sent shockwaves around the City, with nearly £700million wiped off the value of the merchant bank Close Brothers in a single session last month. 

Yesterday it was Vanquis Banking that was left reeling.

Vanquis said that while it is not part of Financial Conduct Authority investigations in motor financing, it has seen ‘significant levels of third-party complaint submissions’. 

It cautioned that even though the ‘vast majority’ of complaints are not upheld, rising costs of reviewing them will ‘materially’ impact profits.

In January, the UK financial services watchdog said it was probing whether compensation could be due for people who were potentially overcharged for car loans.

If it finds misconduct, those affected will be compensated.

Vanquis said it was exploring proactive legal steps to address this situation.

MoneySavingExpert.com, consumer rights activist Martin Lewis’s platform, said more than 1million complaints have been submitted using a tool it launched on February 6 – an average of 30,000 per day.

The group warned its profit for this year will be far lower than the £75million analysts expect.

Shares plunged 50 per cent, or 62.1p, to 62.1p, reducing the value of the business by nearly £160million. Close Brothers, meanwhile, fell 2.5 per cent, or 9.4p, to 373.6p.

The FTSE 100 edged up 0.1 per cent, or 9.49 points, to 7669.23 and the FTSE 250 inched down 0.4 per cent or 71.69 points to 19530.09.

National Grid has sold another chunk of the business and plans to use some of the £700million worth of proceeds to pay down its debt.

A consortium of long-term investors led by Macquarie Asset Management, which already owned 60 per cent of the company, bought another 20 per cent stake.

The rest is still controlled by National Grid, which rose 0.1 per cent, or 1.5p, to 1054.5p. 

Iron ore miner Ferrexpo tumbled after one of its businesses had its accounts frozen following a court order.

Ukrainian police started investigating that division in November 2022 following allegations of illegal rubble extraction.

Shares crashed 26.8p, or 18.8p, to 51.4p.

Weak iron prices weighed on other miners.

Rio Tinto fell by 1.2 per cent, or 60p, to 4809.5p and Glencore lost 0.6 per cent, or 2.35p, to 398.4p. 

Anglo American slipped in early trading, but by the close, it managed to inch up 0.01 per cent, or 0.2p, to 1850.8p.

Darktrace shares, meanwhile, surged after an upgrade from brokers. 

The cybersecurity company last week hiked its forecasts for this year and said it will step up efforts to combat threats posed by artificial intelligence (AI).

Shares soared 15.6 per cent, or 58.8p, to 436.2p.