The motor finance redress scheme's final form

On 30 March 2026, the FCA published its final policy statement (PS26/3) on the motor finance redress scheme, setting out how firms must deliver large‑scale consumer redress.  

As the table below shows, there have been several changes since the consultation, published last October. These include the agreements in its scope and the redress calculations. Among the most notable updates is the FCA’s confirmation that the average redress payment is now expected to be £829, compared with the consultation‑stage estimate of around £700.  

Several new operational, data and governance requirements have also been confirmed.  

The FCA confirmed that the scheme will apply to regulated motor finance agreements entered into between 6 April 2007 and 1 November 2024 where commission was paid to a credit broker. Following consultation feedback, however, the FCA has split the framework into two schemes:

• Scheme 1, covering agreements entered into from 6 April 2007 up to and including 31 March 2014
• Scheme 2, covering agreements entered into from 1 April 2014 up to and including 1 November 2024

Any agreements entered into before April 2014 fall entirely within Scheme 1 even if they continued afterwards.

The schemes target unfairness arising from undisclosed commission arrangements. Consumer hire agreements remain excluded. Compensation will only be available where certain arrangements were not properly disclosed, including:

• Discretionary commission arrangements
• High commission ctructures (over 39% of the total cost of credit or 10% of the loan amount)
• Exclusive or near exclusive lender-broker ties, with captive or white label arrangements with franchised dealers excluded where the relationship was clearly branded and visible to consumers

As in the consultation, the FCA has confirmed that lenders, not brokers, are responsible for running the scheme, since they are legally responsible for the credit relationship and hold the data needed to assess liability and calculate redress. This approach is intended to deliver faster and more consistent outcomes, given the much smaller number of lenders.

However, brokers must cooperate by providing relevant information, such as historic commission arrangements, within required timeframes, and failure to do so may lead to regulatory action.

The FCA has written to CEOs setting out expectations, including accurate consumer tracing, proper evidence gathering (including from brokers), correct calculation and prompt payment of redress, and robust handling of objections and data gaps. Firms are expected to demonstrate transparency, strong governance and operational readiness, and data gaps will not be tolerated.

For agreements within scope, lenders must assess whether an unfair relationship existed and whether this caused the customer loss or damage.

The first question (of the unfair relationship) is to be based on the presence of a relevant arrangement (a discretionary commission arrangement, a high‑commission arrangement or a tied arrangement) and whether it was adequately disclosed.

Disclosure is presumed inadequate unless the lender holds clear evidence to the contrary, and missing records cannot be relied on. An unfair relationship can only be avoided where the lender can evidence adequate disclosure, a DCA was not used (lowest rate applied), a tied arrangement was not operated in practice, or a captive/white‑label tie was clearly visible through franchised‑dealer branding.

On whether the unfair relationship caused loss or damage, once unfairness is established, loss is presumed. The only permitted rebuttal (excluding DCA cases) is where the lender can prove the customer could not have obtained a lower APR elsewhere on the broker’s panel. If this cannot be evidenced, redress must be paid.

Crucially, the FCA is clear that all rebuttals must be supported by documented evidence. Where such records are missing or incomplete, firms must assume that disclosure was inadequate and proceed with redress accordingly.

The FCA has confirmed two redress outcomes. In rare, serious (Johnson type) cases, consumers will receive a full commission refund plus interest where the commission was exceptionally high (at least 50% of the total cost of credit and 22.5% of the loan) and involved an undisclosed DCA or tied arrangement.

In most cases, however, a hybrid remedy will apply, equating to the average of the full commission repayment and an estimated loss based on an APR uplift (21% for pre 2014 agreements and 17% for post 2014), subject to caps, with the lowest cap payable.

Compensatory interest is set at the Bank of England base rate plus 1%, with a minimum of 3% per annum, and cannot be challenged by consumers.

The FCA has confirmed the final redress process:

Complaints made before the scheme starts will be assessed automatically, with redress outcomes issued within three months of the end of the implementation period. Lenders only need to contact consumers who may be owed money, inviting them to opt in, and those consumers will have six months to respond.

Consumers not contacted can still complain directly to the lender by 31 August 2027. Complaints currently paused under DISP will transfer into the scheme and be resolved under scheme timelines.

Consumers who have already received compensation for the same issue, or whose complaints are already with the FOS, are excluded from the scheme. Previously rejected complaints will not be reassessed automatically and will only be eligible if the agreement contains a relevant arrangement. There will be no obligation to revisit cases rejected solely because they did not involve a DCA.

The FCA has accelerated the scheme’s timetable. It has now formally commenced on 31 March 2026, triggering firms’ obligations to prepare for delivery under the final rules.

Lenders must complete an implementation period of five months for Scheme 1 agreements (2007–2014) and three months for Scheme 2 agreements (2014–2024), to build the required systems, processes and data controls. Redress outcomes for existing complainants must be issued within eight months (Scheme 1) or six months (Scheme 2) of the scheme launch.

The FCA emphasises the need for strong data quality, early operational readiness and coordinated firm‑wide planning to meet these deadlines.

We support firms across the full lifecycle of the scheme—from interpreting the FCA’s final rules and tracking ongoing regulatory guidance, to mobilising data, governance and operations in line with FCA expectations.

We provide hands‑on implementation support, including programme management, process and workflow design, MI development and customer‑journey support, to help firms meet demanding timelines. We also deliver independent assurance over data quality, eligibility, redress calculations and controls, giving Boards, SMFs and regulators confidence that implementation is robust and defensible.