The Financial Conduct Authority has issued further guidance for firms and consumers following legal challenges to its motor finance compensation scheme. Firms should continue preparatory work for the scheme unless told otherwise, but the FCA is also now supervising lenders on a central planning assumption that, if the scheme or parts of it are quashed, historic liabilities would instead be handled through a complaint-led and supervisory approach. The regulator says this contingency means lenders must be operationally and financially ready, including through appropriate provisions and engagement with auditors. For now, firms should keep identifying relevant complaints and agreements, collecting data on commission arrangements and disclosure practices including information held by brokers, resolving cases where consumers are represented by more than one claims company or law firm, and cooperating promptly with the Financial Ombudsman Service. Implementation plans are still due by 12 May, although the FCA will not insist on formal attestations by that date. It will also be pragmatic and not require firms to send customer communications under the scheme timetable for now. Complaints entirely outside the scheme should continue to be handled in the usual way, while the FCA is considering whether firms should now progress non-motor-finance-commission elements of mixed complaints. The timing of the Upper Tribunal case is unclear and is unlikely to be before October. The FCA is discussing with the Tribunal and challengers whether some parts of the scheme can be suspended while preparatory work continues. As a precaution, lenders should prepare to resume handling complaints within normal statutory timeframes from mid-November 2026, on the basis that there would be no further extension of the complaints pause and no immediate new FCA rules or guidance on redress methodology. Consumers concerned about motor finance commission are being encouraged to complain directly to their lender rather than use claims management companies or law firms that may charge more than 30 percent of any compensation.
Financial Conduct Authority 2026-05-08
Financial Conduct Authority tells lenders to keep preparing the motor finance redress scheme while planning for a complaint led fallback by mid-November 2026
The Financial Conduct Authority has updated guidance on its motor finance compensation scheme amid legal challenges, confirming firms should continue preparations while it supervises lenders on the basis that any quashed elements would be handled through complaints and supervision. Lenders must stay operationally and financially ready, including via provisions and auditor engagement, keep identifying relevant complaints and agreements, collect data on commission and disclosure, cooperate with the Financial Ombudsman Service, and be ready to resume normal complaint handling from mid-November 2026. Consumers are urged to complain directly to lenders rather than use potentially costly claims management firms.