Motor finance is the largest live conduct exposure in UK retail lending. The FCA confirmed a redress scheme in PS26/3 on 30 March 2026, and on 2 July 2026 the Upper Tribunal suspended parts of it while legal challenges are heard. Firms do not currently have to calculate or pay redress under the scheme. They do still have to identify affected agreements, gather the data and answer complaints, and the firms that manage this at lowest cost are those that build the data now.
Where the scheme stands
| Item | Position |
|---|---|
| Policy statement | PS26/3, published 30 March 2026 |
| Agreements in scope | Motor finance agreements from 6 April 2007 to 1 November 2024 |
| Expected redress | About £7.5 billion, according to the FCA |
| Implementation dates | 30 June 2026 for agreements from 1 April 2014; 31 August 2026 for earlier agreements |
| Legal challenge | Parts of the scheme suspended by the Upper Tribunal on 2 July 2026; hearing listed for 16 February to 3 March 2027 |
| Not-owed decisions | Agreements from 1 April 2014, complaint made by 30 June 2026: by 18 November 2026. Earlier agreements, complaint made by 31 August 2026: by 18 January 2027 |
While the suspension lasts, the FCA expects firms to identify relevant complaints and agreements, gather commission and disclosure data including data held by brokers, tell complainants who are not owed compensation by the deadlines, keep complainants informed about the legal challenge, and plan for a scenario in which the scheme is quashed in whole or in part. Brokers must provide requested documents, or confirm they do not hold them, within one month. Lenders and brokers holding consumer credit permissions are both in the frame.
Where the exposure comes from
The issue is the relationship between the lender, the credit broker and the customer, and specifically the commission arrangement between lender and broker and what the customer was told about it.
Three dimensions determine exposure.
Commission model. Arrangements under which broker remuneration varied with the interest rate charged to the customer create a direct conflict between the broker's interest and the customer's.
Disclosure. What was disclosed to the customer, when, in what form and whether the customer could reasonably have understood the arrangement and its effect on the price.
Suitability and process. Whether the broker's conduct, the lender's oversight of the broker and the affordability assessment met the requirements applicable at the time.
The data problem
Most firms discover that the population cannot be identified from a single system. Agreement data sits in a lending platform, commission data in a broker or dealer settlement system, and disclosure documents in document management or with the dealer.
A workable reconstruction requires, for each agreement, the origination date, the broker or dealer, the commission model and rate applicable at that date, the rate charged to the customer against the lender's standard rate, the disclosure documents in force at that date, and the current contact details and status of the customer.
| Data element | Common source | Typical gap |
|---|---|---|
| Agreement terms | Core lending system | Archived or migrated data incomplete |
| Commission model | Broker settlement records | Historic model versions not retained |
| Rate discretion | Pricing or scoring system | Rationale for rate applied not recorded |
| Disclosure documents | Dealer or document store | Version history not maintained |
| Customer contact | CRM | Out of date for settled agreements |
Where records are incomplete, firms should document the gap, the reconstruction methodology and the assumptions applied. Undocumented assumptions are the most expensive part of any remediation.
Complaint handling in the interim
Firms must continue to handle complaints, and how they do so will be examined. Three disciplines matter.
- Consistency. Similar facts should produce similar outcomes. Divergence across teams or time periods indicates a defective process.
- Reasoning. Each decision should record the facts found, the standard applied and the reason for the outcome.
- Vulnerability. Customers in financial difficulty or with characteristics of vulnerability require adjusted handling and prioritisation.
Complaint volumes also require capacity planning. Under-resourced complaint handling produces late responses, which produce referrals, which produce a second layer of exposure.
Provisioning and capital
Provisioning estimates depend on population size, uphold rate assumptions, average redress per case and administration cost. Each assumption should be documented, sensitivity tested and reviewed as data improves. The board should understand the range, not only the central estimate, and the firm's capital and liquidity planning should reflect the plausible upper case. The FCA has asked firms to plan for a scenario without the scheme, including provisions and capital and liquidity in UK regulated entities, so the range should cover both outcomes.
Governance the board must be able to evidence
- A named executive owner of the redress programme with defined authority.
- Board or committee oversight with a standing agenda item and recorded challenge.
- A documented methodology for population identification, assessment and redress calculation.
- Independent quality assurance over case decisions, with re-testing.
- Management information showing progress, uphold rates, ageing and complaint quality.
Our guidance on CONC compliance, affordability and forbearance covers the wider consumer credit framework, and our note on policy monitoring and remediation sets out remediation programme design.
About Regulatory Counsel
Regulatory Counsel advises UK and international financial services firms on authorisation, prudential and conduct requirements, governance, financial crime and regulator engagement.
Our motor finance work covers population reconstruction methodology, commission and disclosure analysis, complaint handling framework and quality assurance, redress calculation methodology, provisioning assumptions review, board reporting and regulator engagement.
Contact our regulatory team at [email protected] for a written proposal.
This article is provided for general information and does not constitute legal or regulatory advice. Firms should confirm the current position against FCA publications and take advice on their specific circumstances.
Frequently asked questions
It concerns historic commission arrangements between lenders and credit brokers, particularly models where broker remuneration varied with the interest rate charged, and whether those arrangements were adequately disclosed to and understood by customers.
For each agreement: origination date, broker or dealer, the commission model and rate applicable at that date, the rate charged against the standard rate, the disclosure documents in force, and current customer contact and status.
With consistent outcomes across similar facts, documented reasoning for each decision, prioritised handling for vulnerable customers, and capacity planning sufficient to meet response deadlines.
From documented assumptions on population size, uphold rate, average redress and administration cost, with sensitivity analysis presented to the board as a range and revisited as data quality improves.
A named executive owner, board or committee oversight with recorded challenge, a documented assessment and calculation methodology, independent quality assurance over case decisions, and management information covering progress and decision quality.
An industry-wide scheme set out in PS26/3 on 30 March 2026 to compensate motor finance customers treated unfairly on commission between 6 April 2007 and 1 November 2024. The FCA expects it to return about £7.5 billion.
In part. On 2 July 2026 the Upper Tribunal suspended parts of the scheme while four legal challenges are heard. The hearing is listed for 16 February to 3 March 2027. Firms do not currently have to calculate or pay scheme redress, but must keep preparing, handling complaints and gathering data.
For agreements from 1 April 2014 where the customer complained by 30 June 2026, by 18 November 2026. For earlier agreements where the customer complained by 31 August 2026, by 18 January 2027. Later complaints should receive a not-owed decision within 5 months.
Complete the population and data work now, keep provisions under review for both a scheme and a no-scheme outcome, and keep complainants informed. If the scheme is upheld the FCA expects payments to begin in 2027.
Definitive guides on this topic
The permanent reference pages this article relates to.