The FCA has released Consultation Paper CP25/27, proposing a Motor Finance Consumer Redress Scheme to address potential consumer harm arising from historic commission arrangements in car finance. This follows the Supreme Court’s Johnson v FirstRand Bank Ltd ruling and is designed to ensure consistent, fair outcomes for affected customers across the industry.
What the Scheme Covers
The proposed scheme applies to regulated motor finance agreements made between 6th April 2007 and 1st November 2024 where a commission was paid to a credit broker. It targets situations where:
- A Discretionary Commission Arrangement (DCA) was used;
- Commission levels were high or potentially unfair; or
- Commission or lender relationships were not properly disclosed to the customer.
If a firm cannot evidence that commission was clearly disclosed, the FCA proposes that the default assumption should be non-disclosure, putting the onus on firms to demonstrate compliance.
Although lenders will be legally responsible for delivering the scheme, credit brokers and appointed representatives (ARs) will play a key supporting role. They will need to provide historic data, assist with customer identification and cooperate with lenders in the redress process.
How Redress Would Work
The FCA suggests a standardised process for calculating and paying redress, broadly reflecting court principles. Consumers who qualify may receive a refund of commission (plus interest) or an equivalent payment if their agreement is found to have been unfair.
The FCA’s modelling estimates an average payout of around £700 per agreement, with total industry costs potentially exceeding £8 billion. Implementation and administration costs could add a further £2–3 billion.
What Credit Broking Firms and ARs Should Do Now
While the redress obligations sit with lenders, brokers should act now to prepare:
- Audit historical records, especially commission disclosures and agreements.
- Engage with principals to understand data requests and responsibilities.
- Review complaints handling processes, as the FCA plans to extend motor finance complaint deadlines to 31 July 2026.
- Consider responding to the consultation before the 4th November 2025 deadline.
The FCA’s proposed redress scheme represents a major shift in how historic motor finance complaints are addressed. For credit brokers and ARs, the focus should be on readiness, record-keeping and cooperation. Acting early will help demonstrate compliance and maintain trust with both lenders and consumers.
