FCA Motor Finance Redress Scheme Explained

With the FCA’s motor finance redress scheme now published, the focus for lenders and brokers shifts to next steps in line with the scope, timelines and expectations.

The regulatory message is clear: firms are expected to evidence decision making and to put in place the resources needed to handle large-scale customer redress. There are tight deadlines and expectations around early readiness, including the need to articulate delivery approaches to the FCA. Firms that delay now risk compressing already challenging timelines.

There are two schemes:

• Scheme 1 relates to agreements taken out between 6 April 2007 and 31 March 2014. The implementation period ends 31 August 2026

• Scheme 2 relates to agreements taken out between 1 April 2014 and 1 November 2024. The implementation period ends 30 June 2026

The first step for lenders is to notify the FCA whether they intend to use the implementation period for Scheme 1 and/or Scheme 2 and provide the name and contact details of the responsible Senior Manager. This has to be submitted by 13 April 2026.

Lenders that don’t intend to use the voluntary implementation period must also notify the FCA at least 15 days before their intended start date, and submit their 6-week delivery forecast, along with their Scheme Implementation Plan.

For other lenders, the ‘Scheme Implementation Plan’ must be submitted 6 weeks after the date of the final rules publication, alongside their delivery forecast. This shouldn’t be a high-level document. It must include operational design choices including:

• A cohort strategy: how cases are grouped at scale.

• policies and procedures for data collection, case grouping etc (see CONRED 5.9.7 R (3)).

• identification methodology: how in-scope agreements are found.

• Application of limitation and rebuttals.

• Quality assurance framework, setting out how outcomes are checked.

• Controls and risk management: error prevention and escalation.

This will be firms’ blueprint for their implementation of the scheme.

The delivery forecast must set out:

1] The name and contact details of the Senior Manager responsible for oversight and overall delivery of the scheme.

2] Attestations from an appropriate Senior Manager confirming their firm has robust processes, systems and controls in place to:

• Identify the starting population of potentially impacted consumers

• Identify the firm’s own records required to assess claims

• Obtain records to assess scheme claims where these are not held by the firm

3] The number of agreements in the firm’s starting population.

4] The monthly forecast of the number of agreements to be processed per month, until all motor finance agreements have reached the end of the scheme.

5] How many letters will be sent inviting the consumer to opt into and out of the scheme.

6] How many cases will be assessed and closed.

There have been some concerns – given the short deadlines - that Senior Managers will struggle to properly attest to “having taken responsibility for the firm’s overall oversight and delivery of the scheme”. The FCA does expect high confidence, especially where rebuttals are used. Senior Managers in this position should adopt an ‘evidenced confidence’ approach:

• Establish a dedicated remediation programme – this isn’t business as usual.

• Require regular meetings/check-ins and clear escalation routes for risks/issues.

• Require data mapping showing how the firm will identify relevant agreements and handle incomplete or inconsistent data.

• Test whether the approach is workable and repeatable

• Scrutinise cohorting and decisioning logic – is it scalable?

• Challenge whether different cohorts produce consistent customer outcomes.

• Treat rebuttals as a high-risk area, and ensure that where they’ll be used, good quality evidence is required.

It is also important to understand how redress will be calculated and challenge whether the outcomes will be fair and consistent:

• Ask for the calculation model and any documentation

• Require worked examples across cohorts

• If you’re unsure, get an independent review or speak to the FCA

Other aspects include:

• Challenge whether the firm can deliver at scale.

• Require a robust control framework, ensuring controls are in place to prevent errors, detect issues early and escalate any failures.

• Ensure meaningful 2^nd and 3^rd line involvement – don’t rely solely on delivery teams’ assurances.

• Ensure any uncertainties are explicitly identified and managed.

• Actively engage with each step, keeping clear written records of challenge and decisions.

• Require regular MI packs – these will likely need to be more often than monthly.

The attestation must be from a “suitable Senior Manager, under the Senior Managers and Certification Regime (SM&CR) on the firm’s preparatory steps for the scheme, confirming the firm has robust processes, systems and controls in place to successfully identify the starting population of potentially affected consumers, to identify firm records and to plug any information gaps.” The FCA say that they encourage firms to engage with them early if they have any questions or concerns.

Importantly, if the firm doesn’t have the records, it will need to ask the broker for the information, who will need to respond within 1 month.