FCA motor lending redress scheme

Published on: 08/10/2025 11:00

The FCA has announced that lenders will make around 14 million payouts to individuals affected by unfair motor finance agreements, resulting in an estimated total redress of £8.2 billion. While this is a reduction on the FCA’s initial estimate of £9 to £18 billion (redress and scheme costs), the industry still believes this is too high.
The proposed redress scheme reflects a significant step to reduced uncertainty for consumers expecting compensation where motor finance arrangements were not transparently disclosed, and for lenders who will need to operate the scheme. The FCA scheme announcement is a positive move toward resolving this complex issue, avoiding lengthy court proceedings and reducing claims management costs, an area where the FCA has plans to tackle poor practice.

Challenges for lenders

The scheme places a substantial operational burden on lenders, who are expected to validate self-reported claims, including agreements that concluded over a decade ago. Some contracts could date back to 2007, the reality being that records from that period may no longer be easily retrievable, if they exist at all, for both lenders and customers.

It remains to be seen whether the working of the scheme will effectively reward or penalise firms which have retained records for longer than the usual 7 year minimum.

Wider transparency implications

While this scheme is a direct response to the Supreme Court judgement, it may signal the FCA generally tightening its stance on transparency and a shift in how remuneration is scrutinised, in line with Consumer Duty and reflecting the wider implications of the Supreme Court decision. While the immediate impact is on motor finance, these principles are relevant for other sectors. Firms dealing with retail customers should consider whether they meet the transparency expectations of the Court ruling and the FCA in response.

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