FCA confirms motor finance redress scheme - Auxillias’ thoughts on the final rules

Following our first read yesterday we’ve now pulled together a more detailed paper on the FCA’s final motor finance redress rules - setting out what has changed and what firms should be thinking about now.

This has already gone to our clients and registered community and we are now making it more widely available. Please click on the button below to fill in the form if you are interested in receiving it:

Summary from 30 March 2026:

The FCA has now confirmed that it will proceed with a motor finance redress scheme and has published PS26/3 together with a public statement outlining its objectives and expectations. The FCA says the scheme will return £7.5 billion to consumers, with millions of claims paid this year and the vast majority settled by the end of 2027.

This is Auxillias’ first read of the final rules. It sets out the key differences from CP25/27. A fuller briefing will follow.

What the FCA has said today

In its announcement, the FCA is explicit. It has concluded that firms broke laws and rules in force at the time by failing to disclose important information about commission arrangements, and that an industry-wide redress scheme, free to consumers, is the best way to secure fair and consistent outcomes while preserving a functioning motor finance market. It’s set up a specific Supervisory Team that will monitor the scheme and where necessary enforce. 

The FCA expects most eligible consumers to use the scheme rather than the courts. It estimates that, at a 75 percent participation rate, firms will pay £7.5 billion in redress, with total costs, including implementation and administration, of about £9.1 billion. That is lower than the total cost projected in the consultation, but still a very substantial exercise.

The five big changes from the consultation

Our view is that five changes matter most for firms.

 1. Two schemes, not one

The FCA has moved from a single scheme to*two schemes:

- Scheme 1:agreements entered into between 6 April 2007 and 31 March 2014.

- Scheme 2: agreements entered into between 1 April 2014 and 1 November 2024.

The FCA’s reason is straightforward. It remains satisfied that the section 404 FSMA conditions are met for the whole period, but it recognises that some respondents questioned its powers in respect of the pre-2014 period. By creating two schemes, it aims to ensure that any challenge to Scheme 1 does not delay redress for consumers in Scheme 2. The FCA is clearly anticipating legal challenge.  

This is a structural change from CP25/27, which proposed a single scheme across the full period.

2. Fixed implementation periods and a staged timetable

The consultation envisaged the scheme starting immediately after the Policy Statement. The final rules introduce implementation periods and a more staged timetable.

These timetabled  dates sit alongside near‑term supervisory expectations. Within six weeks of 30 March 2026, firms must provide the FCA with a one‑off information submission and implementation plan, supported by senior manager attestations. This is a short window and firms that have not already started to prepare may find this a significant hurdle. 

3. Tighter and more targeted eligibility

The FCA’s announcement emphasises that it has “tightened the eligibility criteria so only those treated unfairly are compensated”. The final rules do this in several ways.

The scheme still focuses on inadequate disclosure of one or more relevant arrangements:

- a discretionary commission arrangement  

- a high commission arrangement  

- a tied arrangement

The final rules narrow the population by carving out low‑risk and edge cases. They raise the high‑commission trigger, exempt very small and zero‑interest commissions, remove very high value loans (with an accessibility carve‑out), and treat some visibly branded captive arrangements as fair. 

In addition, firms can, in limited circumstances, treat older high‑commission‑only agreements as out of scope on limitation grounds where the fact of commission was clearly disclosed, even if the amount was not.

Overall, the population is narrower than that envisaged in CP25/27. The FCA now estimates 12.1 million  eligible agreements, down from about 14.2 million in the consultation baseline.

4. Re‑worked consumer contact and complaints model

The FCA’s statement confirms that firms will not  have to write to every historic customer. Instead, firms must:

- tell consumers who have already complained, or who complain before the relevant implementation period ends, whether they are owed compensation and how much, within three months of the end of that implementation period;

- contact non‑complainants only where there is at least one relevant arrangement or where they have been excluded on limitation grounds;

- allow consumers who are not contacted to complain by 31 August 2027.

This is a material change from CP25/27’s broader outbound contact expectations. It reduces avoidable contact with consumers not owed redress, but raises the importance of accurate identification of relevant arrangements and careful limitation analysis.

The consultation also envisaged an opt‑out process for existing complainants. That has gone. Under the final rules, consumers who complained before the scheme starts do not need to opt in or opt out. Firms simply have to decide whether redress is due and notify them within the prescribed period.

5. A revised remedy and interest structure

The FCA’s announcement notes that it has “improved how compensation is calculated to better reflect loss, while respecting the Supreme Court judgment”. The details are important here but what we can say is these are significant changes from the consultation modelling. They are key to the revised average redress figure of about £829 per agreement and the overall £7.5 billion projection.

What this means for firms

The FCA’s confirmation today draws a clear line under the design phase. The scheme will go ahead, the timetable is fixed, and the key parameters are now clear. The final framework is more targeted and, in some respects, perhaps more workable than CP25/27, but it remains demanding.

The motor finance sector will take some comfort from the lower projected redress bill, the Task Force set up by the FCA and other regulators and the clarity the new rules provide. However the creation of a specific Supervisory team, two distinct schemes and a fixed timetable will lead some to worry about the new complexity the 584 page document introduces.