FCA Publishes Further Detail on Possible Motor Finance Redress Scheme
10 Jun 2025
2 min read
The FCA has published further detail on the criteria it will apply if it introduces a redress scheme as part of its review into motor finance commission arrangements. The FCA anticipated this back in March, but the new statement adds much-needed colour to the potential design of the scheme.
Why now?
Since January 2024 the FCA has been investigating the use of discretionary motor finance commission arrangements (where brokers could increase the interest rate on a customer finance deal and receive higher commission as a result) prior to their ban in 2021.
Further the Court of Appeal’s decision in the three test cases of Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd, and Hopcraft v Close Brothers Ltd, that raised the possibility of widespread liability among motor finance firms where commissions were not disclosed and consented to by customers, has recently been appealed before the Supreme Court.
The Supreme Court has indicated that its judgment may be delivered next month (July).
Principles of the scheme
The FCA has identified the following 7 principles as a guide for any future redress scheme:
| Comprehensiveness – to cover as wide a range of complaints as possible |
| Fairness – to be fair to consumers and firms |
| Certainty – to give consumers and firms finality |
| Simplicity and cost effectiveness – easy for consumers to participate in |
| Timeliness – resolve the majority of claims in a reasonable timeframe |
| Transparency – clear explanations and publicly available information on scheme progress |
| Market integrity – support the availability of high quality, competitively priced motor finance |
Mechanics of the scheme
The FCA’s aim is to design a balanced redress scheme that is easy for customers to use, without the need for claims management companies or legal representation, whilst also avoiding redress rates that are too high, with the potential to cause motor finance firms to go out of business or withdraw from the market.
In this context, the FCA is considering whether the scheme should be:
- opt-in: where the onus is on the customer to confirm to the firm by a certain date if they want to be included; or
- opt-out: where customers are automatically included unless they opt out.
The FCA has also indicated that, mindful of the need to be fair to consumers whilst ensuring the integrity of the motor finance market, it may take a different approach to calculating redress to that taken by the FOS in similar circumstances.
Next steps
The FCA still intends to confirm within 6 weeks of the Supreme Court judgment if it will introduce a redress scheme and, if so, the timings for issuing a consultation.
The FCA’s current expectation is that firms would be expected to implement any redress scheme in 2026.
Those wishing to provide feedback on the key principles can email: [email protected]
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This article was written by Matthew Pegler and Hannah Miller