FCA Confirms £7.5 Billion Motor Finance Redress Scheme for 12.1 Million Agreements

The Financial Conduct Authority has officially confirmed its motor finance redress scheme, setting aside £7.5 billion to compensate 12.1 million consumers affected by undisclosed commission arrangements in motor finance agreements dating back to 2007.

The final scheme represents a significant reduction from initial consultation estimates, with the FCA tightening eligibility criteria to ensure only consumers who were genuinely treated unfairly receive compensation. The regulator listened to over 1,000 consultation responses and engaged extensively with consumer groups, professional representatives, firms, manufacturers, investors and industry bodies before finalizing the approach.

Scope and Eligibility

The motor finance redress scheme covers agreements taken out between 6 April 2007 and 1 November 2024 where commission was payable by the lender to the broker. Consumers will only be considered for compensation if they weren’t told details of at least one of three arrangements between the lender and the broker:

• Discretionary commission arrangements that allowed brokers to adjust interest rates to obtain higher commission
• High commission arrangements of at least 39% of the total cost of credit and 10% of the loan
• Contractual ties that gave lenders exclusivity or right of first refusal, except where visible links with manufacturer and dealer can be proven

The FCA has implemented several changes from the consultation stage, including raising the threshold for high commission cases and ensuring agreements involving minimal commission or zero APRs will not receive redress. These adjustments reduced eligible agreements from 14.2 million at consultation to 12.1 million in the final scheme.

Compensation Calculations and Timeline

Approximately 90,000 consumers whose cases align closely with the Johnson case considered by the Supreme Court will receive full commission repayment plus interest. For all other cases, consumers will receive a hybrid remedy based on average estimated loss and commission paid, plus interest.

The FCA estimates average redress per agreement at £829, with implementation timelines set as:

• 30 June 2026 for loans taken out from 1 April 2014
• 31 August 2026 for agreements from 6 April 2007 to 31 March 2014

Firms will have three months from the end of the implementation period to notify complainants about compensation amounts, with most consumers expected to receive compensation this year and the remainder by the end of 2027.

Market Impact and Compliance

The FCA has established a dedicated supervisory team led by a Director to ensure firms comply with the scheme rules. Senior managers will be required to attest to responsibility for their firm’s overall oversight and delivery of the scheme, with regular reporting requirements and potential enforcement action for non-compliance.

Despite initial concerns, the motor finance market has continued to function well since the Supreme Court judgment, with share prices of affected UK listed lenders increasing by 2.1% to 29.7% in the two weeks following the ruling. New car sales in February reached a 22-year high, and a record £41 billion was lent on motor finance in 2025.

The FCA concludes there will be limited impact on the new car finance market, with any short-term effects in used and subprime segments expected to be modest and replaced over time. The regulator emphasizes that without this scheme, the impact on access to motor finance and prices for consumers could be significantly higher with uncertainty continuing for many more years.