Following the Supreme Court’s judgment in Hopcraft the FCA issued a statement, on 3 August 2025, in which it confirms that it will consult on an industry-wide redress scheme to compensate motor finance customers who were treated unfairly.
The FCA will issue its consultation on the redress scheme by early October and for it be open for 6 weeks. It will then aim to finalise the rules such that the scheme can launch in 2026, with consumers starting to receive compensation next year.
The FCA will propose that discretionary commission arrangements (DCAs) are covered by the redress scheme – where the broker could adjust the interest rate offered to a customer – if they were not properly disclosed. It will also consult on which non-DCAs should be included and whether there should be a de minimis threshold to be eligible for a compensation payment. It has not yet decided whether to propose an opt-in or opt-out scheme.
In the consultation the FCA will consult on how firms should assess whether the relationship between the lender and borrower was unfair for the purposes of the redress scheme and if so, what compensation should be paid. The FCA will consider a range of factors and this will include if and how factors such as the non-disclosure of the nature and size of the commission, tied commercial relationships and customer sophistication should be factored in. It also plans to consult on an interest rate for each year of the redress scheme based on the average base rate that year plus 1%. This would be in the ballpark of a simple interest rate of 3% per annum.
The FCA anticipates that the total costs to motor finance lenders could be between £9 billion and £18 billion although it will probably land somewhere in the middle — significantly lower than previous forecasts of £44 billion.
The FCA currently estimates that most individuals will probably receive less than £950 in compensation per agreement.
The FCA is of the view that the redress scheme should cover agreements dating back to 2007 so that this is consistent with the complaints the Financial Ombudsman can consider although the regulator is discussing this with the Government.