FCA motor finance implementation period statement

FCA statement

Motor finance compensation scheme to include implementation period

We are considering over 1,000 responses to our proposals for a compensation scheme for motor finance customers who were treated unfairly.

If we proceed with a scheme, we are likely to make several changes. If we do go ahead, we expect to publish final rules in late March. The timing of publication will be outside market hours and we will confirm the date in advance.

Final decisions on the scheme have not yet been made. But to help firms prepare and ensure consumers get any money owed promptly, we are setting out some details now on how we intend to streamline the consumer journey and make it smoother for firms to operate.

Given the scale and complexity of the scheme and in response to feedback, we are likely to introduce an implementation period of 3 months, with up to 5 months for older agreements. Firms could choose to process claims under the scheme sooner.

We would also streamline the process for consumers and firms.

·    People who complain before the scheme starts would no longer be asked if they wish to opt out. Instead, within 3 months of the end of the implementation period, their lender would tell them whether they are owed compensation, and how much.

·    Consumers receiving a redress offer would be able to accept it immediately, rather than waiting for a final determination.

·    Firms would not be required to write to customers via recorded delivery. We would allow a range of channels that best meet consumers' needs with appropriate safeguards to prevent fraud. 

Even with an implementation period, streamlining the process means millions of people would receive compensation in 2026.

Our advice remains that anyone concerned they weren't told about commission involved in their motor finance deal should complain now. Doing so means they should get any compensation sooner. There is no need to use a claims management company (CMC) or law firm, and those who do may lose over 30% of any compensation. We have cracked down on poor practice by FCA-regulated CMCs. Over 800 misleading adverts have been removed or amended since January 2024 and we have intervened with 5 CMCs causing harm: 2 reduced exit fees and 4 agreed to stop taking on new clients until they can show they comply with our rules.

The likely changes to the scheme were supported by many consumer groups and firms that responded to our consultation. As well as providing a better experience for consumers, the changes would help keep the cost of delivering the scheme proportionate, supporting a well-functioning market for the millions of people that rely on it.