Context
The FCA has issued a statement and published a consultation (and a number of annexes) on its proposed motor finance redress scheme for motor finance customers who were treated unfairly, along with analysis and supporting evidence. The FCA’s review, covering data from 32m agreements, found widespread failings on how motor finance firms disclosed commission payments and commercial ties between lenders and brokers. Inadequate disclosure of commission means consumers are less likely to make informed decisions, negotiate or shop around for a better deal and the FCA’s analysis indicates that many may have overpaid on their motor finance.
Key points to note and next actions
The update on 7 October 2025, confirms the FCA is consulting on introducing an industry-wide compensation scheme for motor finance customers. If the FCA decides to introduce a redress scheme, it expects to publish the Policy Statement and final rules by early 2026. The scheme will launch at the same time, with the FCA expecting consumers starting to receive compensation before the end of 2026.
The consultation period for the redress scheme proposals ends on 18 November 2025 and firms can tell the FCA their views by using the FCA response forms or by emailing cp25-27@fca.org.uk.
Response forms:
- All proposals about the proposed motor finance redress scheme.
- Just proposals to give firms more time to send a final response to certain motor finance complaints.
- Just proposals we’ve identified as likely to be of particular interest to consumers.
The FCA is also consulting on further extending the deadline for firms to respond to motor finance complaints involving discretionary commission arrangements. The consultation period for this closes on 4 November 2025, and final rules are due to be published by 4 December 2025. It has also extended the time firms have to deal with motor finance complaints where non-discretionary commission (non-DCA) was involved.
The main changes made to existing complaint handling rules are:
- Extending the time firms have to provide a final response to non-DCA commission complaints received on or after 26 October 2024, until after 4 December 2025. The FCA definition of a motor finance non-DCA commission complaint covers regulated motor leasing agreements, as well as regulated motor credit agreements.
- Consumers who receive a final response to such complaints will have until the later of either 15 months from when the final response is sent or 29 July 2026 to refer their complaint to the Financial Ombudsman Service.
- Firms will have to maintain and keep records that are or could be relevant to the handling of existing or future motor finance complaints or civil claims for non-DCA commission.
Where firms have previously rejected complaints because they didn’t involve a DCA, the FCA expects firms to allow consumers to make a new complaint about commission.
The FCA is encouraging firms to use the additional time provided to make sure they have the resources to investigate and issue final responses to complaints at the end of the proposed extension period and also to consider whether to make any financial provisions.
Firms affected by these changes, must ensure they comply with the rules in Appendix 5 of the Dispute Resolution: Complaints Sourcebook (DISP App 5) that are relevant to their business.