On 11 March 2025, the Financial Conduct Authority (FCA) published a statement on its next steps in relation to the motor finance review.

Background

The FCA is currently reviewing the past use of motor finance discretionary commission arrangements (DCAs), with the aim of understanding if firms failed to comply with requirements relating to DCAs and if consumers lost out as a result. If they have, the FCA intends to ensure consumers are appropriately compensated in an orderly, consistent and efficient way.

Potential consultation

Since the review was launched, a ruling by the Court of Appeal has raised the possibility of widespread liability among motor finance firms wherever commissions were not properly disclosed to customers, and the FCA has been granted permission to intervene in the appeal.

The FCA confirms that if, taking into account the Supreme Court’s decision, it concludes that motor finance customers have lost out due to widespread failings by firms, then it is likely to consult on an industry-wide redress scheme. Under a redress scheme, firms would be responsible for determining whether customers have lost out due to the firm’s failings and, if they have, offering appropriate compensation. The FCA would set rules firms must follow and put checks in place to ensure they do.

The redress scheme is intended to be simpler for consumers than bringing a complaint, and the FCA expects it to result in fewer consumers relying on a claims management company (and therefore keeping all of any compensation they receive). The FCA also notes that it would be more orderly and efficient for firms than a complaint led approach, contributing to a well-functioning market in the future.

Next steps

The FCA no longer plans to make a further announcement in May, as previously intended. It will instead confirm within 6 weeks of the Supreme Court’s decision whether it is proposing a redress scheme and, if so, how it will take that forward. Its next steps on non-DCAs will also be informed by the outcome of the case.

There may also be a separate consultation on changes to the FCA’s rules, depending on the Supreme Court’s decision.

The FCA notes that, throughout its work, it will continue to consider how to make sure affected consumers are appropriately compensated and the motor finance market continues to work well, with effective competition.