FCA to publish motor finance redress consultation on Tuesday

The Financial Conduct Authority (FCA) will issue a statement to the market and publish its long-awaited consultation on a proposed motor finance redress scheme shortly after markets close on Tuesday, 7th October 2025, the regulator confirmed today. The consultation will include supporting evidence and analysis on how compensation for mis-sold car finance could be delivered across the industry.

The scheme is expected to address widespread concerns over historic discretionary commission arrangements (DCAs) and related practices, which were found to have led some consumers to pay higher interest rates on car loans.

Around 30 million motor finance agreements signed between 2007 and 2020 are under review, with roughly 14 million potentially eligible for redress, according to previous evidence given by FCA chief executive Nikhil Rathi to MPs on the Treasury select committee.

The FCA’s consultation, which follows a Supreme Court ruling on commission disclosure earlier this year, will set out options for compensation and operational details of how the scheme could run. A six-week consultation period is planned, with a framework expected to be finalised before the current pause on consumer complaints about motor finance ends in early December.

Rathi has said the scheme will include a clear cut-off date for claims to avoid the drawn-out process seen during the PPI redress programme.

He added that a “critical mass” of payments is likely to be made in 2026, once the framework is in place and firms begin settling claims.

FCA chair Ashley Alder has previously stated that the regulator’s aim is to provide a more efficient and certain route to compensation than through the courts, where ongoing litigation has created delays and uncertainty for both consumers and lenders.

While most of the 38 firms affected by the investigation are said to be cooperating with the FCA, Rathi acknowledged that “a range of cooperation” exists, and that some firms have questioned the need for a formal redress scheme.

Compensation awards are expected to be relatively modest — typically in the hundreds rather than thousands of pounds — and will vary depending on the facts of individual cases. The consultation will also consider whether additional economic losses should be taken into account in certain circumstances.

The publication of the FCA’s proposals marks a significant step in what could become one of the largest financial redress programmes since PPI, as the regulator seeks to balance consumer protection with maintaining stability in the motor finance market.