FCA Considering “Possible” Motor Finance Consumer Redress Scheme

In a new statement published this morning, the FCA shared some of the considerations they are currently assessing for a “possible” Motor Finance Consumer Redress Scheme if the Supreme Court judgement concerning discretionary commission arrangements finds in favour of the effected consumers.

Recap: What’s happening with DCAs?

Prior to the 2021 ban on the practice, some motor finance lenders allowed car dealers to adjust the interest rates offered on financing deals provided to customers, with higher interest rates earning more commission for the broker. Subsequently there has been a large number of complaints from consumers who had not been aware of these arrangements, known as DCAs, and the majority of these complaints were rejected because they did not believe they had caused their customers any harm. In 2024 the Financial Ombudsman Service found in favour of the complainants in two cases generating a lot of publicity and in turn creating a further surge in complaints about DCAs.

Because of this, the FCA began an investigation into the past use of DCAs in January 2024. Meanwhile, the Court of Appeals found that in 3 cases where customers had not consented to or been given information about DCAs, the broker had behaved unlawfully. Those brokers then appealed to the Supreme Court, and a hearing took place in April 2025. A judgement is expected to arrive next month, July 2025.

What have the FCA announced? What would a potential redress scheme look like?

The FCA previously stated in March that “if, following the outcome of the Supreme Court judgment, we conclude motor finance consumers have lost out, it’s likely that we’ll consult on an industry-wide consumer redress scheme” . Their new statement suggests they are now preparing for this possibility following discussions with consumer groups, Motor Finance businesses and industry bodies.

The scheme would define rules for how businesses assess each claim and calculate the redress to be paid in cases where it is found to be due.  The key principles the FCA are considering in designing a redress scheme are:

• Comprehensiveness
• Fairness
• Certainty
• Simplicity & Cost Effectiveness
• Timeliness
• Transparency
• and Market Integrity

Their statement notes that there would be tension between some of these principles and there would be a need to carefully consider and balance competing concerns. They also mention that they want the scheme to be easy to use and to be understood by consumers and to make it clear that there is no need to use a Claims Management Company or law firm.

The two models they are currently looking at are an Opt In scheme, where ” customers would have to confirm to their firm by a certain date that they wish to be included” or alternatively an Opt Out scheme, where “customers are automatically included”. The regulator notes that there are questions here on how easy the process is for consumers vs how much is required by the firms.

What comes next? How should you prepare?

Right now, it’s difficult to speculate on anything beyond the above information – the FCA have said that within 6 weeks of the Supreme Court judgement, they will announce if there will be a Redress Scheme and at that point they will lay out timings for a formal consultation process. That consultation would include a full proposal for how the scheme would work and draft rules including timings. Following that consultation, there would subsequently be final confirmation on if there will be a Redress Scheme and what the final rules are, including when to implement the scheme which today’s statement says they expect to be in 2026.

There are a lot of still unknown factors here – there is the initial Supreme Court judgement and then the FCA decision and then the consultation. At this point all that Motor Finance firms can do is make sure they are prepared for the range of possible outcomes.

Over the last 5 years, Kind Consultancy has supported multiple Motor Finance organisations of all sizes including global brands in Complaint Handling, QA and Complaint Administrative needs.  If you’re interested in a confidential discussion about your Complaint Handling and Redress resource needs, our Kind Agile Solution offering may be able to help – contact us for a conversation on 0121 643 2100 or via info@kindconsultancy.com