On 30 March 2026, the Financial Conduct Authority (FCA) confirmed (in PS26/3) that it will proceed with an industry-wide motor finance consumer redress scheme under section 404 of the Financial Services and Markets Act 2000. 

The scheme is designed to compensate consumers who were treated unfairly in connection with regulated motor finance agreements entered into between 6 April 2007 and 1 November 2024. The FCA estimates that firms will pay approximately £7.5 billion in redress, with total industry costs of around £9.1 billion once implementation and operational expenses are included. The stated objective is to provide comprehensive, consistent and timely redress, while bringing finality to firms and investors (an aspect that was lacking with PPI redress), rather than impose a penalty. 

The choice of 6 April 2007 as the start date for the scheme is legally driven. That date marks the commencement of section 140A of the Consumer Credit Act 1974, which introduced the “unfair relationship” provisions. From that point, courts and the Financial Ombudsman Service (FOS) were empowered to grant remedies where a credit relationship was unfair to the consumer. The FCA’s position is that liabilities arising from unfair relationships caused by inadequate disclosure of commission arrangements have existed since that date. The scheme is, therefore, framed as a mechanism for addressing existing statutory exposure in a consistent and efficient way, rather than requiring claims to be pursued individually through complaints, the FOS or the courts, which, the FCA says, would be slower, more costly and less certain for both firms and consumers. 

The FCA has, nevertheless, chosen to divide the scheme into two distinct periods. Scheme 1 applies to agreements entered into between 6 April 2007 and 31 March 2014, while Scheme 2 applies to agreements entered into between 1 April 2014 and 1 November 2024. The FCA’s view is that liability applies across the whole period but the split addresses legal and practical considerations. In particular, some consultation respondents questioned whether section 404 FSMA could properly be applied to conduct predating the FCA’s assumption of consumer credit regulation from the Office of Fair Trading in April 2014. By structuring the exercise as two schemes, the FCA seeks to ensure that if the earlier period were subject to legal challenge, redress for post-2014 agreements can proceed without delay. The division also reflects operational considerations, including materially weaker data availability for earlier agreements and the need to apply different parameters (for example, loss assumptions) in a manageable way. 

Under the scheme, redress is payable where there was inadequate disclosure of one or more “relevant arrangements”, namely:

• a discretionary commission arrangement (DCA) allowing the broker to influence pricing;
• a high commission arrangement exceeding specified thresholds; or
• a tied arrangement restricting the broker’s independence.

The scheme contains a number of exclusions and exceptions, including de minimis commission amounts, zero-APR agreements, most very high-value loans, and cases that have already been finally determined by a court or the FOS. Firms may also rebut the presumption of unfairness in defined circumstances, including where no loss was suffered or where the arrangement was not operative in practice. 

Remedies are prescribed. In a subset of cases (the FCA estimates about 90,000 cases) which are closely aligned with the Supreme Court’s decision in Johnson v FirstRand Bank Ltd [2025] UKSC 33, which was one of the conjoined motor finance appeals and the only case in which an unfair relationship was upheld by the Supreme Court under s.140A CCA, consumers will receive redress of all commission plus interest. The FCA defines these as cases involving an undisclosed contractual tie and/or DCA and very high commission of at least 50% of the total cost of credit and 22.5% of the loan. For all other cases, consumers will receive the average of estimated loss and the commission paid, plus interest (the hybrid remedy). The estimated loss is based on economic analysis that shows there was a difference in the APR on DCA loans compared to those with flat fee arrangements.

The scheme is designed to ensure that consumers are not put in a better position than if they had been treated fairly, nor advantaged over those who experienced the greatest degree of unfairness. As a result, in approximately one third of cases where the hybrid remedy applies, redress will be capped at the lowest of: (i) 90% of the commission paid, plus interest; (ii) the total cost of credit, adjusted to reflect a minimal cost of credit that was available to only 5% of the market at the time (excluding 0% APR offers); or (iii) the actual total cost of credit, calculated on a simplified basis, which may apply where an adjusted calculation is not possible, for example because the lender does not hold a full payment schedule. On this basis, around 64,000 agreements - where the APR was in the lowest 5% offered in the market at the time, excluding 0% deals - will not receive any compensation.

From an operational perspective, firms will have a short implementation period, running to 30 June 2026 for post‑2014 agreements and 31 August 2026 for earlier agreements, followed by fixed timeframes for assessing and contacting eligible consumers. Firms are not required to write to all historic customers, but only to complainants and those potentially due redress, significantly reducing delivery costs. To ensure compliance, senior managers will be required to attest to oversight and delivery of the scheme, and the FCA has established a dedicated supervisory team, with enforcement action possible where firms fail to comply. A dedicated taskforce has also been set up with the Solicitors Regulation Authority (SRA), Advertising Standards Authority (ASA) and the Information Commissioner’s Office (ICO) to tackle the “poor handling of motor finance claims by some claims management companies (CMCs) and law firms.