FCA’s redress scheme: a turning point for motor finance

The FCA’s proposed compensation scheme for mis-sold car finance marks a significant moment for consumer protection and industry accountability. With up to 14 million customers potentially affected, this is more than redress – it’s a chance to reset. Lenders and brokers now face a critical consultation period, with transparency and fairness at the heart of what comes next.

Why now matters

The FCA’s proposed £8 billion scheme spans agreements from 2007 to 2024, addressing historic use of discretionary commission models, estimating an average payout of £700.

This isn’t a sudden intervention. The FCA has been working towards this since 2017, banning discretionary commissions in 2021. The Supreme Court’s recent ruling accelerated action. The message is clear: where disclosure rules weren’t met, redress must follow. The six-week consultation offers firms a real opportunity to shape the scheme and ensure it works in practice.

Scale, complexity – and the need for clarity

With millions potentially eligible, the scheme’s scope is vast. While a thorough review of the detail is required, there appear to be some unintended consequences in the design and eligibility criteria, which will hopefully be identified and addressed through the consultation process. It’s clearly important that lenders and brokers deliver against the requirements, which is balanced against ensuring the customers are correctly compensated.

Managing expectations, protecting trust

The £700 figure has already shaped headlines – but it’s not a guarantee. The idea of an average “payout” per finance agreement risks misleading customers. Many won’t see that figure – and some may have a very different experience altogether. That gap between expectation and reality matters. It can fuel frustration, damage trust, and open the door to claims driven by misinformation.

Balancing the expectations of every stakeholder in the market isn’t easy. To deliver consistent redress, compromise is essential – from all sides. That’s the direction the FCA is clearly steering towards in its consultation.

What firms should do now

This is a moment for proactive engagement. Lenders and brokers should take part in the consultation, review historic practices, and prepare for implementation in 2026. Many firms are already focused on making sure their customers have the right information at the right time. For any that slightly behind on that should embed Consumer Duty principles – fairness, clarity, and accountability – across their operations. 

Looking ahead

This scheme isn’t just about resolving the past. It sets a new benchmark for how motor finance will work. For lender and brokers it’s a chance to continue to rebuild trust, strengthen relationships, and ultimately show what good looks like in a changing market.