Financial regulators have delayed the closing date for its proposed industry-wide motor finance redress scheme. The Financial Conduct Authority (FCA) announced an extension and will now consider evidence submitted before its new deadline of December 12.
The extension follows feedback from lenders and consumer representatives indicating that analysis of the extensive market-wide data would require additional time, as would implementing mechanisms for any resulting scheme.
Submissions are still being encouraged, including on consultation questions that may require less time to complete.
The authority still expects to publish final rules in early 2026.
Since launching the consultation on October 7, the FCA has undertaken extensive engagement with consumer groups, lenders, investors, motor manufacturers, trade bodies and professional representatives.
Key issues raised during the engagement process include the scheme’s time period, the rate of compensatory interest, mechanisms to ensure confidence in the process (including the role of the Financial Ombudsman), cost-effective operation for smaller firms, fraud prevention methods, and the implications of commercial ties between motor manufacturers and their captive lenders (a lender owned by a manufacturer that provides financing directly to customers buying its products).
In a wholly transparent process, the regulator noted that 11 lenders involved in its investigation into historic discretionary commission arrangements have had access to data showing their disclosure rates since August 16, 2024.
The FCA estimates that 14.2 million agreements, representing 44% of all motor finance deals made since 2007, will be considered unfair due to inadequate disclosure. Based on an anticipated participation rate of 85%, lenders could face total redress costs of £8.2 billion, with consumers receiving an average of approximately £700 per agreement.
In addition to direct payments, the FCA estimates that if 85% of eligible consumers participate, the administrative cost to firms of implementing the scheme would be approximately £2.8bn. They emphasised that, without a compensation scheme, costs would be significantly higher, with cases proceeding through the courts or the Financial Ombudsman Service, resulting in greater administrative and legal expenses.
Motor finance complaints remain paused until December 4, with approximately four million complaints already in place. The FCA’s objective is to ensure a trusted sector can continue serving millions of consumers annually while providing fair compensation to those who were treated unfairly under historic commission arrangements.
Stakeholders wishing to respond to the consultation should submit their evidence and feedback by 5pm on December 12.
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