FCA consultation on motor finance redress scheme
Introduction: Why the fca redress scheme matters
The Financial Conduct Authority (FCA) has proposed an industry-wide fca redress scheme addressing commissions in motor finance. The topic is important because it responds to a recent Supreme Court judgment and could lead to substantial compensation for consumers and significant costs for lenders. The consultation seeks to set clear methods for calculating redress where dealer-paid commissions were not adequately disclosed.
Main developments and scope of the proposed scheme
Origins and timing
On 7 October 2025 the FCA published Consultation Paper CP 25/27, following the Supreme Court judgment on 1 August 2025 in the cases of Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd. That judgment addressed whether commission payments by lenders to car dealers breached duties owed to customers.
Which agreements are covered
The FCA proposes the scheme would cover regulated motor finance agreements taken out by consumers between 6 April 2007 and 1 November 2024 where commission was paid by the lender (or a third party) to a credit broker. The proposed scope includes arrangements involving discretionary commissions, commissions alleged to be too high, and transactions with commercial ties between the lender and the dealer that were not adequately disclosed, giving rise to “unfair relationships” under the Consumer Credit Act 1974.
Remedies and calculation
Where a customer’s agreement meets specific thresholds—commission of at least 50% of the total cost of credit and 22.5% of the loan amount—and involves a tied arrangement, the lender must apply the higher of the Commission Repayment Remedy or the APR Adjustment Remedy. The FCA also proposes a rebuttable presumption of loss for inadequate disclosure: lenders can rebut this only with clear, contemporaneous, customer-specific evidence that the consumer would not have obtained a lower rate elsewhere among the dealer’s partner lenders at the time.
Conclusion: Impact and next steps
The FCA estimates the fca redress scheme could lead to about £8.2bn in consumer compensation and around £2.8bn in implementation costs for the lending industry. The consultation will determine final scope and mechanics; lenders and dealers will need to review historical files and evidence, while affected consumers may be entitled to compensation if the scheme is adopted. The consultation responses and any subsequent policy decisions will be closely watched for their practical and financial implications across the motor finance market.
