FCA redress scheme: clarity at last, but real test is delivery

Summary

The FCA’s final motor finance redress scheme, published on 30 March 2026, has brought long-awaited clarity to one of the biggest conduct issues the sector has faced in years. The regulator says the scheme covers 12.1 million agreements written between 2007 and 2024, with around £7.5bn of compensation expected to be paid and average redress of about £829 per successful claimant. It expects millions of customers to receive payouts in 2026, with most cases completed by the end of 2027.

That was the backdrop to Finance Connect’s latest webcast, sponsored by Odessa, where David Betteley was joined by Wayne Gibbard, partner at Shoosmiths, to assess what the final policy statement really means and where firms should focus next.

From the outset, the webcast struck the same note many firms are now wrestling with: this is a major step forward in certainty, but not a simplification of the work ahead.

“Better than feared is not the same as simple to deliver.”

A long road to a final scheme

Gibbard began by placing the scheme in its wider context. In his view, the policy statement is best understood not as a sudden intervention, but as the final stage of a process that stretches back nearly two decades: the expansion of intermediary-led motor finance after 2007, the transfer of consumer credit regulation to the FCA in 2014, the regulator’s review of discretionary commission arrangements from 2017 onwards, the DCA ban in January 2021, then the sharp rise in complaints, Ombudsman referrals and litigation that followed.

That historical framing mattered because it underlined one of the webcast’s key themes: the FCA has now made a deliberate strategic choice. Rather than allowing complaints and court cases to continue one by one, it has opted for a market-wide redress model designed to produce a consistent outcome for consumers while preserving a functioning market. The FCA itself says the scheme is intended to compensate customers who were treated unfairly because firms failed to disclose important information about commission or relevant ties with brokers.

Gibbard described the final scheme as “imperfect” but argued that it was always going to be. With more than 1,000 consultation responses from lenders, consumers, lawyers, trade bodies and claims firms, there was never going to be a version that satisfied everyone. The real question now is whether firms see the final scheme as more manageable than the alternatives.

Legal challenge still hangs over the market

One of the most discussed elements of the final package was the FCA’s decision to split the scheme into two periods: 2007 to 2014 and 2014 to 2024. Industry commentary since publication has focused heavily on whether that split is partly designed to manage legal vulnerability around the earlier period, when consumer credit regulation sat with the OFT rather than the FCA.

That issue came through strongly in the webcast poll. Asked whether they expected a legal challenge to the scheme, 66% of respondents said yes, led by a lender or group of lenders.

Gibbard did not rule that out, but his answer was measured. It is still early, he said, and firms are only just digesting a very large policy statement. He noted that strong reactions are emerging on all sides: some lenders will feel the FCA has gone too far, while some consumer representatives may argue it has not gone far enough. The question is not simply whether the scheme is flawed, but whether firms believe it is preferable to the uncertainty of no scheme at all.

The FCA has reduced the overall projected bill from earlier estimates by narrowing assumptions, lowering expected uptake from 85% to 75%, and introducing features such as exclusions and thresholds. At the same time, the final scheme still leaves the industry facing a compensation programme on a very large scale.

Not just a lender issue

A practical theme that ran through the webcast was responsibility across the distribution chain.

While the scheme places primary financial liability on lenders, Gibbard was clear that the operational burden does not stop there. Dealers and brokers may not write the cheques, but they will still be expected to support implementation. If a lender needs historical records, disclosure wording, evidence of customer communications or documentation about the sales process, intermediaries will need to help produce it.

“This is not just a lender problem; it is a sector-wide delivery challenge.”

That matters because the FCA is not treating this as a narrow reimbursement exercise. It is treating it as a conduct response with clear expectations around governance, evidence, customer contact and supervisory engagement. Firms that assume they can sit back because another party carries the direct redress cost may quickly find otherwise.

Evidence is now a competitive issue

If there was one practical warning from the webcast that should resonate most widely, it was this: firms need to be able to prove what happened.

That is especially relevant for businesses with mixed sales journeys – online lead generation, showroom discussion, telephone follow-up, then digital completion – and for businesses that have grown through multiple systems and legacy processes. Gibbard said he did not see the FCA’s redress scheme forcing an outright pivot from face-to-face to online sales, but he did see it placing far greater weight on evidential quality and auditability.

That may prove to be one of the scheme’s lasting effects. In motor finance, competition has often centred on speed, convenience and conversion. After PS26/3, provability may matter just as much.

Evolution, not revolution, in current sales practice

The webcast also addressed a question many firms are asking privately: does the final scheme mean sales processes need to be redesigned all over again?

Gibbard’s answer was broadly no, but with an important caveat.

His view was that the market is now more in a phase of evolution rather than revolution. The FCA has effectively drawn a line at 1 November 2024, reflecting its position that many firms changed disclosure practices after the Court of Appeal decision. In other words, the regulator appears to accept that the market has already moved a considerable distance.

But that does not mean firms can assume current processes are beyond challenge. Consumer Duty remains fully in force, and the webcast returned repeatedly to the need for clearer, simpler and more intelligible communications. Gibbard stressed that there is no one-size-fits-all disclosure model because the market is too varied. Customer needs differ, products differ and distribution models differ. What matters is whether firms are giving the right information, in the right way, at the right time.

The legal test may focus on disclosure and fairness, but the practical expectation is broader: firms should be able to show that customers could realistically understand the finance they were taking out.

Captives gain ground, but not a free pass

The webcast’s second poll asked which group came out best from the FCA’s revisions. The audience answer was clear: manufacturer captives.

That reflects a wider view in the market that the final policy statement contains meaningful concessions in areas such as visible links and tied arrangements. But Gibbard was careful not to overstate the point. These are not blanket safe harbours. Firms relying on exclusions still need to show that they satisfy the conditions set out in the rules, and the FCA has made clear that where firms exercise judgment in applying exemptions, supervisory scrutiny will be higher.

So while captives may feel they came through the final round better than many feared, the operational requirement remains substantial. Documentation, rationale and internal consistency will matter.

Claims firms remain a live concern

The FCA has repeatedly said that consumers do not need to use a claims management company to access redress, and has backed that up with direct-to-consumer communications and public warnings against unnecessary fees.

That issue came through strongly in the webcast too. The role and boundaries of claims firms emerged as one of the audience’s main unresolved concerns, second only to what the FCA’s supervisory team will require in practice.

Gibbard’s reading was that the regulator has signalled much tougher oversight of the wider ecosystem around the scheme, not just of lenders. The appointment of dedicated supervisory leadership suggests the FCA expects to police behaviour actively across the redress environment. For claims firms, this could become an important turning point.

Governance may be the real pressure point

Perhaps the most important practical point raised in the webcast was governance.

Gibbard highlighted that firms need to move quickly from policy interpretation to named accountability. The FCA has set out expectations around oversight, mobilisation and data, and those expectations will bite early. Senior managers cannot assume this is simply a compliance workstream that can be parked for later. The governance model, ownership structure and supporting controls need to be robust from the outset.

“Firms now need to prove what happened, not just assume they can reconstruct it later.”

That landed with the audience. In the final webcast poll, the biggest unresolved concern was what the FCA supervisory team will actually require in practice.

That result is revealing. It suggests that for many firms, the biggest anxiety is no longer the existence of the scheme itself, but how the regulator will test readiness, challenge assumptions and judge implementation quality over the coming months.

The bigger shift

By the end of the webcast, one conclusion stood out.

This is not simply another rule change, nor just a compensation exercise. It is part of a deeper reset in how motor finance distribution is expected to work, not only in terms of disclosure, but in terms of evidence, oversight, accountability and customer understanding.

As Finance Connect’s David Betteley said in his closing remarks, this feels less like a small adjustment and more like a fundamental change in how automotive finance will be sold going forward.

“The uncertainty may have eased, but the hard work starts now.”

The FCA has drawn a line under the debate over whether a redress scheme would happen. It has. The industry now knows the broad scale, scope and timetable. What happens next will depend less on headlines and more on whether firms can turn legal clarity into operational control.

Watch the full webcast on-demand here.