What the FCA’s new motor finance redress scheme means for you

What happened?

The FCA’s consultation on the motor finance redress scheme, published on 7 October, set out the scope, methodology and expectations that will shape the industry’s response.

TCC hosted a webinar with Momenta and Recordsure, featuring Chief Product and Commercial Officer Garry Evans and Momenta UK’s Head of Operations Mike Morris, to examine the consultation, the operational realities firms face and how to prepare.

A live poll found 57% of attendees felt the consultation landed as expected, 29% found it worse than anticipated and 14% thought it was better.

Why does it matter?

The scheme will cover all discretionary commission arrangements and other high-commission models, applying to agreements dating back as far as 2007, with firms expected to locate, verify and analyse data that may be nearly two decades old.

The FCA’s own estimates put operational costs at £2.8 billion, excluding redress payments themselves, equating to roughly £240 per agreement across the 11.7 million customers thought likely to opt in.

Strict timelines mean firms must contact existing complainants within three months of launch, reach all other affected customers within six months, and close the complaint window after twelve months.

Who is affected?

Motor finance lenders and brokers with discretionary commission arrangements or exclusive dealer relationships are directly in scope, along with any firm holding agreements dating back to 2007.

Operational, data and complaints teams face the most immediate pressure, since manual intervention will still be needed for legacy data retrieval, tracing customers and handling deceased estates.

Key risks

• Only half of firms polled had reviewed and verified their data availability, and a third had begun identifying in-scope customers.
• Just 17% had developed a tracing and contact strategy, and none reported systems ready to apply redress calculations automatically.
• Half of respondents had not yet started any preparation, despite the FCA intending to launch the scheme in early 2026.

Actions to take

1. Assess the completeness, accessibility and quality of data going back to 2007.
2. Design tracing and communication processes that can reach affected customers within the required timeframes.
3. Balance automation with manual review, supported by quality assurance and oversight.
4. Model potential exposure under the FCA’s proposed redress calculation to plan financial and operational response.

Wider implications

The FCA has positioned the scheme as straightforward and automatable, but the scale of the data challenge, agreements up to two decades old and 11.7 million potential customers, tells a more complex story.

A parallel national advertising campaign is expected to generate significant enquiry volumes before the scheme formally begins, adding further pressure on firms that have not yet prepared.

Recommendations

Firms that invest in early preparation will be in a far stronger position once the final rules are confirmed, starting with understanding what data they hold and where the gaps are.

Ensure contact centres and back-office teams are equipped for higher complaint volumes ahead of the scheme’s launch, rather than scaling up once it is already live.