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FCA

FCA

Financial Conduct Authority (UK)

High Impact

FCA PS26/3 confirms industry-wide motor finance consumer redress schemes

Published

Jul 2, 2026

Effective

Mar 31, 2026

Topics

Motor finance, Consumer redress, Commission disclosure, Consumer credit, Financial Ombudsman Service, FCA supervision, Consumer Duty

Executive Summary

The FCA has confirmed PS26/3, establishing two statutory motor finance consumer redress schemes under section 404 FSMA for disclosure failures relating to discretionary commission arrangements, high commission and tied arrangements. The schemes cover regulated motor finance agreements entered into from 6 April 2007 to 31 March 2014 and from 1 April 2014 to 1 November 2024. The FCA estimates 12.1 million agreements are eligible and expects firms to pay around £7.5bn in redress, with total expected industry costs of £9.1bn including non-redress costs. Lenders must use the FCA’s final liability and redress methodology, apply specified exclusions and exceptions, communicate outcomes within scheme deadlines, use fraud-mitigation controls, provide a standardised factsheet on first contact and report regularly to the FCA. Implementation deadlines differ by scheme period, with later-period agreements requiring readiness by 30 June 2026 and earlier-period agreements by 31 August 2026. Firms should treat this as a high-impact remediation, data, complaints and governance programme.

What Changed

newTwo statutory schemes instead of one

Previous

CP25/27 consulted on a single scheme covering agreements from 6 April 2007 to 1 November 2024.

New

Scheme 1 covers agreements entered into from 6 April 2007 to 31 March 2014; Scheme 2 covers agreements entered into from 1 April 2014 to 1 November 2024.

modifiedEligibility and fairness tests tightened

Previous

The consultation proposed broader eligibility and a high commission threshold of 35% of total cost of credit and 10% of the loan.

New

High commission is at least 39% of total cost of credit and 10% of the loan; small commissions of £120 or less before 1 April 2014 and £150 or less from that date are treated as fair.

modifiedRedress methodology revised

Previous

The consultation proposed an APR-17% loss adjustment for the hybrid remedy and average redress of around £695.

New

The final policy uses APR-21% for Scheme 1 and APR-17% for Scheme 2, a 3% annual interest floor and estimated average redress of about £830 per agreement.

modifiedConsumer contact model narrowed

Previous

The consultation approach would have required broader customer communications, including contact with more customers not owed redress.

New

Firms only need to contact consumers where the scheme requires it, reducing unnecessary communications; consumers not contacted can still complain by 31 August 2027.

newSupervision, reporting and fraud controls

Previous

Existing complaint handling and supervisory arrangements applied, with DCA and non-DCA complaint response deadlines paused separately.

New

Scheme cases move to the scheme timetable from 31 March 2026, and firms must operate FCA scheme reporting, oversight and communication controls.

Business Impact

Who is affected

Directly affected

FCA-regulated motor finance lenders and relevant purchasers of motor finance loan books responsible for administering scheme cases and paying redress.

Indirectly affected

motor finance brokers, dealers, professional representatives, insolvency practitioners, affected consumers, the Financial Ombudsman Service, investors and firms supporting remediation, tracing, calculation, communications and complaints operations.

Jurisdictions

United Kingdom

Business processes

Historic motor finance agreement identification and data remediation, Commission arrangement classification and disclosure assessment, Eligibility screening, exclusions, exceptions and rebuttal governance, Consumer tracing, communications and opt-in management, Redress calculation, interest calculation, capping and payment operations, Complaint handling transition from DISP pause to CONRED scheme process, Financial Ombudsman referral handling, FCA regular reporting, senior manager attestation and supervisory engagement, Fraud mitigation and secure customer communication controls

Estimated effort

High

Compliance risk

High

Affected Reports

FCA motor finance redress scheme regular management information and compliance reporting packSenior manager scheme oversight and delivery attestationConsumer first-contact standardised factsheetConsumer redress determination or provisional redress decision noticeFraud-mitigation communication control using unique consumer reference numbers
FieldValidation rule
Agreement start dateDetermines whether the case falls in Scheme 1, Scheme 2 or outside the scheme: 6 April 2007-31 March 2014; 1 April 2014-1 November 2024.
Commission amountUsed to identify small commission exceptions, high commission, very high commission and redress calculations.
Total cost of creditHigh commission is at least 39% of total cost of credit and 10% of the loan; Johnson-like remedy requires commission of at least 50% of total cost of credit and 22.5% of the loan.
Amount of credit or loan amountUsed for high commission and very high commission thresholds and high-value loan exclusions.
Relevant arrangement typeFirms must identify whether the agreement involved a discretionary commission arrangement, high commission arrangement, tied arrangement, or none.
APR adjustmentHybrid remedy loss component uses APR-21% for agreements before 1 April 2014 and APR-17% for agreements from 1 April 2014.
Interest rate on redressSimple interest is based on annual average Bank of England base rate plus 1%, with a 3% minimum for any year.
Unique reference numberFirms must consistently use a unique reference number in communications with individual consumers or their representatives.

Recommended Actions

7 suggested next steps· derived from source analysis
  1. 1
    Confirmed actionStep 1 of 7

    map all regulated motor finance agreements from 6 April 2007 to 1 November 2024 to Scheme 1, Scheme 2 or out-of-scope status, including loan-book purchaser responsibility where relevant.

  2. 2
    Confirmed actionStep 2 of 7

    build a defensible eligibility engine covering DCAs, high commission, tied arrangements, exceptions, exclusions, limitation decisions and FCA rebuttal criteria.

  3. 3
    AI generatedStep 3 of 7

    perform an early legacy-data gap assessment for commission, APR, total cost of credit, loan amount, payment schedules, broker/dealer relationships and disclosure evidence.

  4. 4
    Confirmed actionStep 4 of 7

    implement the final redress calculator, including APR-21% and APR-17% hybrid remedy adjustments, Johnson-like commission repayment, caps and the 3% annual interest floor.

  5. 5
    Confirmed actionStep 5 of 7

    prepare consumer communication templates, standardised factsheet delivery, secure-channel controls, unique reference numbers and vulnerable-customer handling under Consumer Duty expectations.

  6. 6
    Confirmed actionStep 6 of 7

    design FCA reporting, senior manager attestation and quality assurance controls before the relevant 30 June 2026 or 31 August 2026 implementation deadline.

  7. 7
    AI generatedStep 7 of 7

    coordinate scheme operations with complaints, Financial Ombudsman, legal, insolvency, finance and fraud teams so that paused complaints and consumer challenges are routed correctly.

Timeline

other

Apr 6, 2007

Earliest agreement start date covered by Scheme 1 and the FCA’s stated start point for motor finance liabilities considered under the redress schemes.

other

Mar 31, 2014

Final agreement start date covered by Scheme 1.

other

Apr 1, 2014

First agreement start date covered by Scheme 2; also the date from which the higher £150 small-commission threshold and APR-17% hybrid remedy adjustment apply.

other

Nov 1, 2024

Final agreement start date covered by Scheme 2.

publication

Mar 2026

FCA published Policy Statement PS26/3 confirming the Motor Finance Consumer Redress Scheme final policy and made rules.

effective date

Mar 31, 2026

Paused complaints to which the scheme rules apply move to be dealt with under the scheme rather than DISP complaint-handling rules.

other

May 31, 2026

The existing pause ends for paused motor finance complaints to which the scheme rules do not apply.

implementation

Jun 30, 2026

Implementation period ends for agreements beginning from 1 April 2014.

implementation

Aug 31, 2026

Implementation period ends for agreements beginning before 1 April 2014.

other

Aug 31, 2027

Consumers who are not contacted can still complain to their firm by this date; for non-complainants invited to join Scheme 1, this is also the stated latest opt-in date.

Sources

AI-generated analysis is based on the following primary sources. Always verify against the official publication.

Related Evidence

Verified source support for this analysis

The evidence agent checks whether the drafted finding is supported by official publications and relevant public source material.

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