FCA statement on key considerations for any motor finance redress scheme

The UK Financial Conduct Authority (FCA) has published a statement outlining key considerations for a potential consumer redress scheme, as part of its review into motor finance commission arrangements, following the pending Supreme Court judgement, expected in July. If upheld, the ruling could expose firms to significant liability for failing to disclose commissions.

The FCA indicates that it will likely consult on a redress scheme following the judgment, aiming for a simple, consistent process that does not require consumers to engage in legal or claims management support. To enable swift action once the judgement is delivered, the FCA is looking to engage with stakeholders now and proposes the following principles to guide the scheme's design:

1. Comprehensiveness, to ensure broad coverage of complaints so consumers do not need to pursue court action.
2. Fairness, to ensure methods for identifying breaches and calculating redress are fair to consumers and firms.
3. Certainty, to give consumers and firms finality.
4. Simplicity and cost effectiveness, to make the scheme easy for consumers to use and proportionate in cost for firms.
5. Timeliness, to resolve claims in reasonable time.
6. Transparency, to build consumer confidence by providing clear decisions and publishing data publicly on the progress of scheme.
7. Market integrity, to support long-term access to high-quality, competitively priced motor finance.

The FCA recognises there may be tensions between some principles and encourages feedback to the upcoming consultation. It is also considering whether the redress scheme should adopt an opt-in (customers must confirm participation) or an opt-out (customers are included unless they opt out) model. While some claims management companies and law firms have speculated on redress amounts, the FCA confirms it may take a different approach when calculating redress. A decision on whether to proceed with a scheme will follow within six weeks of the Supreme Court ruling, with final rules expected in 2026 if implemented.

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