UK FCA Final Policy Introducing A Motor Finance Redress Scheme
Summary
The UK FCA published Policy Statement PS26/3 finalizing a motor finance redress scheme following the August 2025 UK Supreme Court ruling. The scheme is split into two separate time periods (April 2007-March 2014 and April 2014-November 2024) to prevent legal challenges delaying redress. Eligibility criteria require proof of unfair treatment through inadequate disclosure of discretionary commission arrangements, high commission arrangements (now set at 39% of total credit cost or 10% of the loan), or certain contractual ties.
What changed
A&O Shearman analyzes the UK FCA's final Policy Statement PS26/3 establishing a motor finance redress scheme following the August 2025 Supreme Court ruling. The FCA split the originally proposed single scheme into two separate schemes covering agreements from April 2007-March 2014 and April 2014-November 2024, to prevent legal challenges to the earlier period from delaying redress for later consumers.
Eligibility criteria were tightened so only consumers treated unfairly receive compensation. Inadequate disclosure of discretionary commission arrangements (where brokers could adjust interest rates for higher commission), high commission arrangements (now set at 39% of total credit cost or 10% of the loan, raised from the proposed 35%), or certain contractual ties triggering unfairness presumptions. The scheme introduces de minimis thresholds, new exclusions for high-value agreements and captive or white-label models, and caps on redress including nil compensation for consumers who paid minimal cost of credit offered to only 5% of the market at the time. Financial institutions offering motor finance must implement the scheme by June 30 for loans from April 2014 and August 31 for earlier agreements, with enhanced governance and senior manager accountability requirements.
What to do next
- Monitor FCA guidance on scheme implementation
- Prepare systems to assess consumer eligibility by time period
- Ensure compliance with new redress caps and de minimis thresholds
Archived snapshot
Apr 9, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
April 8, 2026
UK FCA Final Policy Introducing A Motor Finance Redress Scheme
A&O Shearman + Follow Contact LinkedIn Facebook X Send Embed
The UK Financial Conduct Authority (FCA) has published policy statement PS26/3 on the motor finance redress scheme, following the UK Supreme Court ruling on 1 August 2025. This follows the October 2025 consultation, which we cover in more detail in our blogpost titled " FCA consultation on motor finance redress scheme ". Following feedback, the FCA will proceed with the scheme although with several material changes, including:
- Splitting the originally proposed single scheme into two separate schemes, covering agreements from 6 April 2007 to 31 March 2014 and from 1 April 2014 to 1 November 2024, to mitigate the risk of a legal challenge delaying redress for later-period consumers. This means if the earlier period is subject to a legal challenge, redress for consumers with agreements from April 2014 shouldn't be delayed.
- Tightening eligibility criteria so only consumers treated unfairly are compensated. Inadequate disclosure of one or more of the following will give rise to a presumption of unfairness: (i) discretionary commission arrangements (DCAs), where the broker could adjust the interest rate offered to a customer to obtain a higher commission; (ii) a high commission arrangement; and (iii) certain contractual ties that gave a firm exclusivity or a right of first refusal, except where the lender can prove there were visible links between the lender, manufacturer and franchised dealer.
- Adjusting the redress methodology, including increasing the threshold for high commission arrangements to at least 39% of the total cost of credit (rather than 35%) and 10% of the loan, alongside introducing a de minimis threshold for compensation.
- Changes to the availability and scope of remedies, particularly in relation to high commission arrangements.
- Introducing new exclusions, including certain high value agreements and specific captive or white label models.
- Streamlining the scheme so consumers are compensated quickly and it is cost effective for firms to deliver alongside enhanced governance and senior manager accountability requirements for scheme implementation.
- Introducing caps on redress under the hybrid remedy, including nil redress for consumers who paid a minimal cost of credit offered to only 5% of the market at the time (excluding 0% APR deals). There will be a short implementation period so firms can prepare to operate the scheme. This will be up to 30 June for loans taken out from 1 April 2014 and 31 August for those agreed earlier.
[View source.]
Latest Posts
- UK FOS Final Plans And Budget For 2026/27
- ECB Comprehensive Payments Strategy
- UK PRA And FCA Finalise The FSCS MELL For 2026/27
- Where are we on copyright and AI in the UK
- UK FCA Final Policy Introducing A Motor Finance Redress Scheme See more »
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
Attorney Advertising.
©
A&O Shearman
Written by:
A&O Shearman Contact + Follow more less
PUBLISH YOUR CONTENT ON JD SUPRA
- ✔ Increased readership
- ✔ Actionable analytics
- ✔ Ongoing writing guidance Join more than 70,000 authors publishing their insights on JD Supra
Published In:
Consumer Financial Products + Follow Consumer Lenders + Follow Financial Conduct Authority (FCA) + Follow Financial Services Industry + Follow Loans + Follow New Guidance + Follow Redressability + Follow Regulatory Requirements + Follow UK + Follow Consumer Protection + Follow Finance & Banking + Follow more less
A&O Shearman on:
"My best business intelligence, in one easy email…"
Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra: Sign Up Log in ** By using the service, you signify your acceptance of JD Supra's Privacy Policy.* - hide - hide
Named provisions
Related changes
Get daily alerts for JD Supra Finance & Banking
Daily digest delivered to your inbox.
Free. Unsubscribe anytime.
Source
About this page
Every important government, regulator, and court update from around the world. One place. Real-time. Free. Our mission
Source document text, dates, docket IDs, and authority are extracted directly from A&O Shearman.
The plain-English summary, classification, and "what to do next" steps are AI-generated from the original text. Cite the source document, not the AI analysis.
Classification
Who this affects
Taxonomy
Browse Categories
Get alerts for this source
We'll email you when JD Supra Finance & Banking publishes new changes.