FCA Redress Scheme: A Turning Point for Motor Finance
- Dan Richards
- Jun 8
- 3 min read
FCA Redress Scheme: A Turning Point for Motor Finance
On 3 June, the Financial Conduct Authority published its latest statement on the potential motor finance redress scheme. Titled “Key considerations in implementing a possible motor finance consumer redress scheme”, it marks an important shift in the regulator’s tone and sets a clearer direction for what may lie ahead.
While the Supreme Court’s ruling is still expected in July, the FCA has said it will decide whether to implement a redress scheme within six weeks of that judgment. This latest update goes beyond signalling intent. It outlines a structure and a sense of urgency that firms should now take seriously.
A Different Kind of Scheme
The FCA is clearly exploring a new model, one that feels very different from what we’ve seen in previous remediation exercises.
Key features being considered include:
An opt-out structure, where eligible customers would be automatically included unless they actively decline
A shortened consultation period, anticipated to be around six weeks
A focus on fairness that is balanced with the need to maintain a stable, competitive lending market
This isn’t a re-run of the PPI model. If anything, it suggests the FCA is looking for a simpler, more inclusive approach that avoids many of the pitfalls of past redress programmes. But it also places considerable pressure on firms to ensure their data, operations and customer strategies are ready to respond at scale.
Messaging and the Role of Claims Firms
One of the clearest parts of the update is the FCA’s warning to consumers not to engage claims management companies at this stage. It has said that doing so could result in people losing a significant portion of any future compensation in unnecessary fees.
That sort of message is unusual this early in the process and suggests the regulator is keen to stop the market being distorted by misinformation or premature claims. It also places a clear onus on lenders and intermediaries to get their customer communications right, especially if a redress scheme is confirmed.
Balancing Fairness with Financial Stability
While the FCA has made clear that affected customers should receive redress where appropriate, it has also shown a more pragmatic tone in this latest statement. The potential size of the redress bill, estimated by some media outlets to range from £13 billion to as much as £44 billion, poses obvious challenges.
The regulator has said that any redress must be proportionate and avoid causing instability in the lending market. This is particularly important if smaller or mid-sized firms are involved. The aim appears to be delivering fair outcomes for consumers without making credit more expensive or less accessible in future.
What Firms Should Be Doing Now
Whether or not the FCA proceeds with a formal redress scheme, the direction of travel is clear. For those involved in motor finance, this is the time to get prepared.
Questions firms should be asking themselves include:
Do our current assumptions align with what the FCA is signalling?
Are we confident in our ability to identify affected customers using accurate, structured data?
Have we considered how we would communicate with customers in a scheme that may not rely on individual claims?
Is our proposed response proportionate and ready to withstand regulatory and internal challenge?
Waiting for certainty could prove costly. By the time clarity arrives, the window to act may have narrowed considerably.
Preparing for What Comes Next
As someone leading the remediation programme design for firms navigating this space — including in my capacity as Head of Remediation Programmes at Auxillias — I’ve seen first-hand the importance of early clarity, credible planning, and the right blend of legal and operational insight.
Together, we’re helping firms to pressure-test their assumptions, assess data readiness, and prepare proportionate redress strategies that can flex with evolving regulatory expectations.
While the shape of any scheme is still to be confirmed, the direction is clear: greater inclusion, operational credibility, and balanced consumer outcomes. Those who act early will be best placed to lead through what’s likely to be a fast-moving few months.
If you'd value a confidential conversation to explore your readiness, feel free to get in touch.
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Dan Richards
CEO, Profexx Partners
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