FCA Pushes Motor Finance Deadline as Work on Redress Scheme Picks Up Pace
The FCA has offered a significant update on the progress of its consultation on a redress scheme.
The Financial Conduct Authority (FCA) has pushed back the deadline for responses to its motor finance redress review from 18 November to 12 December 2025, giving stakeholders more time to contribute detailed feedback. According to the regulator, the extra weeks will help gather further insight from lenders, consumer groups, car manufacturers, and other industry participants as discussions around compensation continue to evolve.
Launched on 7 October 2025, the review follows the Supreme Court ruling in August, which confirmed that motor finance lenders carry responsibility for historic commission models. Rather than leaving drivers to pursue claims individually, the FCA sees a single, industry-wide scheme as the most effective route to redress for customers affected between 2007 and 2024.
By extending the timeline, the FCA is signalling that it wants to get this right — balancing speed with accuracy — while still working towards final rules in early 2026.
A Major Step for the Industry
The proposed scheme could cover around 14.2 million finance agreements signed between 6 April 2007 and 1 November 2024. These include cases where discretionary commission arrangements allowed dealers or brokers to raise interest rates to boost their own commission.
The FCA’s early estimates suggest compensation could total between £8.2 billion and £11 billion, with an average payment of roughly £700 per driver. That scale makes it one of the biggest consumer redress exercises the UK’s financial sector has ever seen, and one that could reshape how car finance operates for good.
What’s Being Discussed
The FCA’s update highlights the main areas shaping the final design of the scheme. Stakeholders have already raised thoughtful feedback across several key topics:
- Timeframe for eligibility: Some want more clarity on which agreements will fall under the 2007–2024 window, and whether certain finance models might need separate treatment. The FCA says this is an ongoing point of discussion as it refines how the rules will apply in practice.
- Compensatory interest rate: The regulator’s current proposal is straightforward —the Bank of England base rate plus 1 percentage point. The simplicity is welcome, but many respondents are still debating whether that figure strikes the right balance between fairness and practicality.
- Independence and oversight: Confidence in the scheme will hinge on strong, independent checks. The FCA is reviewing how the Financial Ombudsman Service and other oversight mechanisms could support that transparency and ensure consistency across the sector.
- Support for smaller firms: Smaller lenders and brokers want reassurance that compliance won’t become unmanageable. The FCA has acknowledged these concerns and is considering ways to keep requirements proportionate while maintaining high standards.
- Fraud prevention and data management: With millions of potential claims on the horizon, preventing fraud and duplication is a top priority. Stakeholders are exploring how firms can verify identities, share data securely, and process genuine claims quickly.
- Links between manufacturers and captive lenders: Another area drawing attention is the relationship between car manufacturers and their own finance arms. The FCA wants to ensure these commercial ties don’t distort lending terms or commission structures, especially for new-car sales.
What the Extension Really Means
Both industry groups and consumer representatives had asked for more time to gather evidence and test models before final responses were submitted. The FCA’s decision to extend the window until 12 December 2025 reflects that feedback and gives everyone involved a fairer chance to contribute.
For firms, the coming weeks are a chance to refine data, run internal reviews, and work with trade bodies on what implementation will look like. For consumers, it means that when the scheme finally launches, it should rest on a stronger foundation, one that has benefited from detailed scrutiny and collaboration.
The FCA still expects to publish its final rules in early 2026, and that now looks set for February or March. The road ahead remains demanding, but the direction is clear: a more transparent, accountable, and trusted motor finance sector built on lessons from the past and a fairer deal for drivers.
