What the FCA Has Confirmed Today
After months of consultation, the FCA has published the final rules governing how motor finance lenders must compensate consumers who were overcharged through discretionary commission arrangements (DCAs). Here are the confirmed key points:
1. Opt-Out, Not Opt-In
The scheme operates on an opt-out basis. This is the most consumer-friendly approach possible. If you have already submitted a complaint to your lender — either directly or through a claims management company — you are automatically included in the redress scheme. You do not need to take any further action. Lenders are required to proactively contact affected customers.
2. Scope: April 2007 to January 2021
The scheme covers all motor finance agreements involving DCAs entered into between April 2007 (when the relevant regulatory period began) and January 2021 (when the FCA banned DCAs). Both PCP (Personal Contract Purchase) and HP (Hire Purchase) agreements are covered.
3. Complaint Pause Ends 31 May 2026
The FCA has confirmed that the temporary pause on the normal 8-week complaint response requirement — which has been in place since January 2024 — will end on 31 May 2026. From that date, lenders must begin responding to complaints under the new scheme rules. This means the machinery of compensation formally starts in June 2026.
4. Implementation Period: 3 to 5 Months
Lenders have been given a 3-to-5-month implementation window to build and test their redress assessment systems. The FCA expects all major lenders to be operationally ready by the time the complaint pause ends. Smaller lenders may have slightly longer, but the FCA has made clear it will take enforcement action against firms that are not ready.
5. First Payments Expected Mid-to-Late 2026
Based on the implementation timeline, the first redress payments to consumers are expected from mid-to-late 2026. The FCA has indicated that lenders should prioritise claims that were submitted earliest, which means consumers who registered their claims in 2024 and early 2025 are likely to be among the first to receive compensation.
6. Compensation Amounts: £700 Average, Up to £10,000+
The FCA's impact assessment confirms the expected payout figures:
- Average redress: approximately £700 per affected agreement
- Range: from under £100 for small, short-term agreements to over £10,000 for larger agreements with high commission rates
- Multiple agreements: consumers with two or three affected agreements could receive £1,400–£3,000+ in total
- 8% simple interest is added to the base redress amount, calculated from the date of the original overcharge to the date of payment
Why This Ruling Was Inevitable: The Supreme Court Backstory
Today's FCA announcement did not happen in a vacuum. It follows the landmark UK Supreme Court ruling in Johnson v FirstRand Bank Ltd [2025] UKSC 33, handed down in late 2024.
The Supreme Court held that motor finance brokers (car dealers) owed a fiduciary duty to consumers, and that lenders who paid undisclosed discretionary commissions to those brokers were liable for the resulting overcharges. The ruling confirmed three critical principles:
- Dealers were agents of the consumer, not the lender — even though the lender was paying them. This created a conflict of interest.
- Undisclosed commissions were unlawful regardless of whether they actually caused the consumer to pay a higher interest rate.
- Consumers did not need to prove individual loss — the existence of the undisclosed DCA arrangement was sufficient to establish liability.
This ruling left lenders with no legal ground to resist a redress scheme. The FCA's final rules published today are the regulatory implementation of the Supreme Court's legal findings.
The Timeline: What Happens Now
Who Is Affected? The Full Eligibility Criteria
The FCA's final rules confirm that you are covered by the redress scheme if all of the following apply:
- You entered into a PCP or HP motor finance agreement in the United Kingdom
- The agreement was entered into between 6 April 2007 and 28 January 2021
- The finance was arranged through a motor dealer (i.e., not directly from the lender or bank)
- The lender paid a discretionary commission to the dealer in connection with the arrangement
You do not need to:
- Still own the vehicle
- Still be making payments on the finance
- Have any documentation from the original agreement
- Know the name of the lender (MotorRedress can identify this from your details)
- Have previously complained to the lender
What the Scheme Means for Each Lender
The FCA's rules apply to all regulated motor finance lenders. Here are the largest affected firms and the estimated scale of their exposure:
| Lender | Parent Group | Estimated Provision | Status |
|---|---|---|---|
| Black Horse Finance | Lloyds Banking Group | £3.2 billion | ✓ Provision set aside |
| Santander Consumer Finance | Santander UK | £295 million | ✓ Provision set aside |
| MotoNovo Finance | FirstRand Bank | £500 million+ | ✓ Named in Supreme Court case |
| Close Brothers Motor Finance | Close Brothers Group | £400 million+ | ✓ Provision set aside |
| Barclays Partner Finance | Barclays PLC | £500 million | ✓ Provision set aside |
| Alphera Financial Services | BMW Financial Services | Undisclosed | ✓ Under review |
If your lender is not listed above, you may still be eligible. The FCA's scheme covers all regulated motor finance lenders that used DCAs in the relevant period. Check your eligibility here.
Opt-Out vs. Opt-In: Why This Matters
One of the most significant aspects of the final rules is the opt-out mechanism. In previous FCA redress schemes (such as PPI), consumers had to actively opt in by submitting a complaint. Many eligible consumers never claimed, leaving billions in unclaimed compensation.
Under the motor finance scheme, the process works differently:
| Feature | PPI Scheme (Opt-In) | Motor Finance Scheme (Opt-Out) |
|---|---|---|
| Consumer action required | Had to actively submit a claim | Automatically included if complaint on file |
| Lender obligation | Only reviewed claims received | Must proactively contact affected customers |
| Unclaimed compensation | Billions left on the table | Designed to minimise this |
| Speed | Years (scheme ran 2011–2019) | Lenders must act within months of scheme opening |
What Should You Do Right Now?
If You Have Already Registered a Claim
You do not need to do anything further. Your complaint is on file and will be processed under the new scheme rules. MotorRedress will contact you when your lender issues a redress offer. Keep your contact details up to date with us.
If You Have Not Yet Registered
Now is the time to act. The complaint deadline is 29 July 2026, but there are strong reasons not to wait:
- Queue position matters. Lenders will process claims in roughly the order they were received. Registering now puts you ahead of millions who will rush to claim as the deadline approaches.
- Solicitor capacity is finite. Law firms handling motor finance claims are approaching capacity. Securing representation now avoids the risk of being turned away later.
- It takes 60 seconds and costs nothing. There is no downside to registering now.
If You Are Unsure Whether You Are Eligible
Use our free eligibility checker. It takes less than a minute. We will confirm whether your agreement is likely covered by the scheme — and if it is, we begin the process immediately on your behalf, at no upfront cost.