UK FCA final policy introducing a motor finance redress scheme

The UK Financial Conduct Authority (FCA) has published policy statement PS26/3 on the motor finance redress scheme, following the UK Supreme Court ruling on 1 August 2025. This follows the October 2025 consultation, which we cover in more detail in our blogpost titled "FCA consultation on motor finance redress scheme". Following feedback, the FCA will proceed with the scheme although with several material changes, including:

• Splitting the originally proposed single scheme into two separate schemes, covering agreements from 6 April 2007 to 31 March 2014 and from 1 April 2014 to 1 November 2024, to mitigate the risk of a legal challenge delaying redress for later-period consumers. This means if the earlier period is subject to a legal challenge, redress for consumers with agreements from April 2014 shouldn't be delayed.
• Tightening eligibility criteria so only consumers treated unfairly are compensated. Inadequate disclosure of one or more of the following will give rise to a presumption of unfairness: (i) discretionary commission arrangements (DCAs), where the broker could adjust the interest rate offered to a customer to obtain a higher commission; (ii) a high commission arrangement; and (iii) certain contractual ties that gave a firm exclusivity or a right of first refusal, except where the lender can prove there were visible links between the lender, manufacturer and franchised dealer.
• Adjusting the redress methodology, including increasing the threshold for high commission arrangements to at least 39% of the total cost of credit (rather than 35%) and 10% of the loan, alongside introducing a de minimis threshold for compensation.
• Changes to the availability and scope of remedies, particularly in relation to high commission arrangements.
• Introducing new exclusions, including certain high value agreements and specific captive or white label models.
• Streamlining the scheme so consumers are compensated quickly and it is cost effective for firms to deliver alongside enhanced governance and senior manager accountability requirements for scheme implementation.
• Introducing caps on redress under the hybrid remedy, including nil redress for consumers who paid a minimal cost of credit offered to only 5% of the market at the time (excluding 0% APR deals).

There will be a short implementation period so firms can prepare to operate the scheme. This will be up to 30 June for loans taken out from 1 April 2014 and 31 August for those agreed earlier.

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