FCA’s final motor finance redress scheme: What lenders need to do now

What happened?

On 30 March 2026, the Financial Conduct Authority (FCA) published PS26/3, containing the final rules for its motor finance consumer redress scheme. This is the largest structured redress program in the UK retail lending market since PPI, affecting an estimated 12.1 million agreements.

The scheme targets widespread inadequate disclosure of discretionary commission arrangements (DCAs), high commission arrangements, and exclusive tie-ins. The regulator has structured this into two parallel schemes: Scheme 1 covers agreements from April 2007 to March 2014, while Scheme 2 covers April 2014 to November 2024.

Why does it matter?

The final rules differ significantly from the original CP25/27 consultation, introducing two parallel schemes with separate rules, de minimis thresholds (£120 for Scheme 1, £150 for Scheme 2), and separate implementation periods (3 months for Scheme 2, 5 months for Scheme 1).

Crucially, the high commission threshold was raised to 39%, zero-APR and captive arrangements are excluded, and three complex redress caps were introduced to prevent over-compensation. However, formerly rejected complainants are now reclassified as opt-in, creating serious proactive outreach burdens.

Who is affected?

All motor finance lenders, retail credit brokers, automotive captives, and credit intermediaries in the UK are directly affected by these sweeping changes.

Key risks

Lenders face critical compliance and operational risks if their preparations are insufficient:

• Severe backlogs and failure to handle provisional decisions within strict 3-month post-implementation deadlines.
• Incorrect redress calculations failing to apply the new triple-cap rules, leading to under- or over-compensation.
• Incomplete identification and proactive notification of the opt-in ‘rejected complaints’ cohort.

Actions to take

Lenders must act immediately to establish compliant operational processes:

1. Notify the FCA by 22 April 2026 of the intent to use the implementation period, naming a designated Senior Manager.
2. Submit a comprehensive Scheme Implementation Plan and delivery forecast with Senior Manager attestation by 6 May 2026.
3. Re-model portfolio exposure using the new 39% threshold, de minimis limits, and hybrid calculation caps.

Wider implications

The shift to a split-scheme format and complex redress caps indicates the regulator’s attempt to balance consumer protection with market stability, yet the operational complexity of managing two parallel streams places extreme pressure on internal systems.

Recommendations

Lenders should deploy specialized external managed services and custom redress calculators to automate pre-screening, handle volume spikes, and secure robust, independent audit trails.