Redress period
The scheme will cover agreements entered into between 6 April 2007 and 1 November 2024, providing a clear window for remediation. The FCA does not expect the statute of limitations to apply in most cases, aiming to offer closure for affected customers without the need for alternative legal routes. There are four stages:
- Stage 1: Identification of In-Scope Agreement and initial consumer contact
- Stage 2: Assessment of whether redress is payable
- Stage 3: Redress calculation
- Stage 4: Customer communication and settlement
Eligibility criteria
Cases will fall within scope if any of the following factors are present:
- Use of a Discretionary Commission Arrangement (DCA)
- High commission levels, defined as 35% of the Total Charge for Credit and 10% of the loan amount
- Tied arrangements, where a broker was tied to a single lender or the lender had a right of first refusal
Redress Calculation Framework
The FCA proposes two segments for calculating redress:
- Segment 1: Cases involving 50% of commission over the total charge for credit, 22.5% of commission over the loan amount, and a tied arrangement
- Segment 2: All other cases
For Segment 1, redress will mirror the compensation awarded in the Supreme Court’s Johnson case—full commission repayment plus interest. For other in-scope cases, two additional remedies are proposed:
- APR Adjustment Remedy: Assumes the appropriate APR should have been 83% of the actual APR paid
- Hybrid approach: A combination of the full commission remedy and the APR Adjustment Remedy
Simplified option
Lenders may choose to settle cases without following the FCA’s four-stage approach. In such cases, they must calculate all three remedy scenarios and offer the highest payment to the customer. Alternatively, lenders may opt to pay the full commission amount, assuming it represents the maximum redress, but must inform customers that the other two calculations were not performed.
Commission definition
The FCA defines a commission arrangement as any agreement between a lender and a credit broker, made in connection with the motor finance agreement, that involves the payment—either directly or indirectly—of commission to the broker.
Burden of proof
One additional point worth noting is that lenders will bear the burden of rebutting any assumptions that failings occurred. This will require them to identify and provide the relevant supporting documentation. In the absence of such evidence, they will be expected to assume that the necessary disclosures were not made
Key decisions for lenders
In its Dear CEO letter, the FCA has urged lenders and brokers to begin preparations for the proposed redress scheme. It identified several areas where firms can take immediate action, including:
- Addressing gaps in customer contact information
- Gathering documentation required to support redress calculations
- Designing and implementing systems and controls to manage the redress process.
For further guidance on preparing for these areas, we outline practical considerations: Court ruling reshapes motor finance - Forvis Mazars - United Kingdom
With these preparatory steps in mind, lenders now face several strategic decisions:
- Approach to settlement
Whether to follow the FCA’s detailed four-stage methodology or opt for the simplified settlement route, which allows for quicker resolution by offering the highest redress amount without full segmentation. - Broker collaboration
Whether brokers can reliably provide the necessary data within the FCA’s prescribed timeframe. Brokers will have one month to respond to lender requests. - Cost recovery strategy
Whether it is commercially viable to recover redress-related costs from brokers, a possibility the FCA has acknowledged in its consultation. - Assurance and attestation
Whether to engage internal teams or external advisors to validate that the FCA’s requirements have been met, assuring the Senior Manager responsible for making the required attestation.
Get in touch with our experts
With deep expertise across the Motor Finance sector, we support firms navigating complex commission-related issues. Our tailored approach ensures comprehensive guidance aligned to each firm’s unique needs and stage in the redress journey. To speak to our experts, get in touch using the button below.
Refrences
[1] FCA consults on motor finance compensation scheme
[2] Motor Finance Consumer Redress Scheme
Court ruling reshapes motor finance
On 1 August 2025, the Supreme Court delivered its judgment in the three cases concerning the partial or non-disclosure of commission arrangements in motor finance agreements.
Motor finance redress scheme
On Sunday, 3 August, the Financial Conduct Authority (FCA) announced that it will consult on a redress scheme to secure compensation of up to £18 billion to affected consumers [1]. This follows the Supreme Court's ruling on 1 August 2025 [2], which largely overturned the Court of Appeal’s decision [3] regarding undisclosed commission payments in motor finance agreements.
FCA intervenes in the Motor Finance Sector
On 11 January, following the first decisions from the Financial Ombudsman Service (“FOS”) upholding complaints relating to “discretionary commission arrangements”, the FCA published its long-expected intervention relating to historic commission issues in the motor finance sector.
Key Contacts
Christos Doumas Director - Conduct Risk and Regulatory - London
Huseyin Sahin Partner - Banking Risk Consulting - London
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