Consultation opens
07/10/2025
07/10/2025
Consultation closes
November
2025
CP25/27: Motor finance consumer redress scheme
We’re consulting on an industry-wide compensation scheme for motor finance customers who were treated unfairly.
Many firms did not comply with the law or our disclosure rules that were in force when they sold loans.
Why we are consulting
We believe a compensation scheme is the best way to ensure consumers who have lost out receive compensation in an orderly, consistent and efficient way. It will also help maintain a well-functioning motor finance market for the millions of people that rely on it.
A scheme on the scale we're proposing requires judgements to simplify in a reasonable way some complex legal and operational issues. This means not everyone will get everything they would like from a scheme. We will seek to be open and transparent, setting out evidence, the options considered and how we have made judgements.
We're also consulting on extending how long firms have to provide a final response to motor finance complaints to 31 July 2026.
Who this is for
This consultation paper (CP) will be of interest to lenders, brokers, consumers and consumer organisations, and motor finance and professional trade bodies.
Next steps
We welcome views on our proposals and potential alternatives, including:
- Extending the complaint handling rules by 4 November 2025.
- Our redress scheme proposals by 18 November 2025.
Tell us what you think by using our response forms or by emailing [email protected].
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.
We’ll confirm by 4 December 2025 whether we’ll extend the deadline for motor finance firms to provide a final response to customer complaints.
If we decide to introduce a redress scheme, we expect to publish our policy statement and final rules by early 2026.
The scheme would launch at the same time, with consumers starting to receive compensation before the end of 2026.
Supporting documents
Our cost benefit analysis (CBA), in Annex 2 of the consultation paper, compares the impacts of our proposed intervention against a do-nothing scenario where consumers continue to complain directly to firms or to the courts to receive redress.
In addition, we have published several supporting documents:
Diagnostic report: FCA review of motor finance commission arrangements – summarises our reviews of 4,041 commission arrangement case files to understand disclosure practices. This informs our assessment of whether there may have been widespread or regular failings by firms. It includes a summary of the advice we received from an external statistician.
Technical annexes to our consultation paper and cost benefit analysis, including:
- Technical Annex 1: Data, analysis of loss, and liability and cost methodologies – describes the data we collected in more detail, our analysis of consumer impacts of inadequate disclosure, and how we calculated costs.
- Technical Annex 2: State of Competition in the Motor Finance Market – our understanding of how competition in the motor finance market works.
- CP25/27 Technical Annex 3: Market Impacts – our analysis of the market impacts of our proposed redress scheme in more detail.
- CP25/27 Technical Annex 4: Market Impacts Methodology – for our market impacts analysis.
Research Note: Motor Finance Consumer Awareness Survey analysis. Additional methodological details are set out in a Technical Annex.
Motor Vehicle Finance Consumer Research – externally commissioned research to understand consumers’ usage, understanding and decisions concerning motor finance.
Market impact assessment on cost of capital and investment in the motor finance market – externally commissioned market impact study on the effects of motor finance redress liabilities.
Finding key topics
See key topics of interest to consumers, firms and other stakeholders, to help you navigate to the relevant section of the consultation paper and annexes. We will keep this list under review during the consultation process.
| Topic | Section |
|---|---|
| Which agreements are covered and who will be eligible for redress | Chapter 4 |
| Overview of the scheme and its stages | Chapters 5, 6, 7, 8, 9, CP annex 7 |
| Evidence of widespread failures by firms and consumer loss | Chapter 3, Diagnostic report, Technical Annex 1 |
| How consumers can access the scheme and how they will be contacted if they are owed redress | Chapters 6, 9 |
| How evidence gaps should be dealt with | Chapters 6, 7 |
| How redress will be calculated, including interest | Chapter 8 |
| How consumers in vulnerable circumstances will be supported | Chapters 5, 7, 8 |
| Our expectations for lenders, brokers and professional representatives, our supervisory approach and reporting requirements | Chapter 10 |
| Extension to complaints handling pause | Chapter 11 |
| Redress cost estimates: | |
| Chapter 8 |
| CP annex 6 |
| Technical Annex 1 |
| Non-redress cost estimates: | |
| CBA |
| Technical Annex 1 |
Request an alternative format
Please complete this form if you require this content in an alternative format.