FCA extends motor finance redress scheme consultation

The Financial Conduct Authority (FCA) has extended the deadline for responses to its consultation on the proposed motor finance compensation scheme from 18 November 2025 to 5pm on 12 December 2025, citing the need for stakeholders to analyse complex data and provide thorough feedback.

The extension comes as part of the regulator’s ongoing effort to finalise an industry-wide redress scheme that will compensate millions of UK drivers affected by unfair motor finance commission arrangements between 2007 and 2024.

Progress since Supreme Court ruling

The FCA said it has been “moving at pace” since the Supreme Court’s August 2025 ruling, which, alongside an earlier High Court judgment, confirmed that motor finance lenders are liable to customers for failing to disclose commission arrangements with brokers and dealers.

The ruling cleared the way for the FCA’s consultation, launched on 7 October 2025, proposing a compensation scheme estimated to deliver around £8.2 billion in payouts to approximately 14 million affected agreements. Including operational costs, the total impact on lenders could reach £11 billion.

Extensive engagement and feedback

Since launching the consultation, the FCA has held extensive discussions with consumer groups, lenders, investors, motor manufacturers, trade associations and legal representatives. The regulator said it was grateful for the “speed and constructiveness” of engagement so far but acknowledged that more time is needed to review market-wide data and ensure the scheme is operationally sound.

Feedback received so far covers several key areas, including the methodology for calculating redress; the appropriate time period for the scheme; the rate of compensatory interest; the role of independent oversight, such as the Financial Ombudsman Service; how smaller or low-volume lenders can participate cost-effectively; fraud prevention measures; and the implications of commercial ties between motor manufacturers and captive lenders.

The FCA emphasised the importance of receiving “as much evidence as possible” on these topics and alternative suggestions to its proposals before taking final decisions.

Transparency and market data

The regulator noted that 11 lenders involved in its investigation into historic discretionary commission arrangements (DCAs) have had access to their disclosure data since August 2024. However, both lenders and consumer representatives have indicated that analysing the extensive data will take additional time.

Next steps

While the consultation deadline has been extended, the FCA said it still expects to publish final rules in early 2026, likely in February or March.

The regulator is also considering whether to extend the pause on handling motor finance complaints, which has been in place since January 2024, but stressed that such pauses “cannot continue indefinitely.”

“It is important, in particular for lenders, to maintain the pace so we can draw a line under this issue and bring certainty to customers, the market and investors,” the FCA said.

“The FCA’s decision to extend the consultation is a step in the right direction. This issue warrants a considered process, and while nine weeks is still short for such a complex and consequential proposal, it’s an improvement on the original six. Customers who rely on the largest point-of-sale market in the consumer credit sector deserve a considered process that leads to a robust redress scheme. A 6-week consultation would not have delivered that, and a badly designed remedy risks creating new problems rather than resolving old ones.”

Background: the £8.2bn redress proposal

Under the FCA’s proposed scheme, borrowers who entered into motor finance agreements between April 2007 and November 2024 may be eligible for compensation if their lenders failed to disclose key commission arrangements.

Consumers would receive an average payout of around £700, and most claims would be handled automatically, without the need for legal representation or claims management companies.

The FCA argues that its proposed industry-wide approach will be faster, fairer and less costly than handling millions of individual complaints through the courts or the Financial Ombudsman Service.

The FCA’s proposed redress scheme has transformed the conversation in UK auto finance. Join us at the AFC UK Autumn Conference on 25th November at County Hall, London, where industry leaders will unpack how the consultation is unfolding, share feedback, debate what comes next, and map out how firms can prepare for a likely 2026 go-live. Hear from experts including Wayne Gibbard (Shoosmiths), Rachael Jones (Autotrader), and Arthur Kipferler (Berylls by AlixPartners).

Find out more and register now.