The Financial Conduct Authority (FCA) has announced it will consult on an industry-wide compensation scheme for motor finance customers after identifying that many firms did not comply with FCA rules or the law by failing to give customers relevant information about commission paid by lenders to car dealers. The proposed scheme follows a Supreme Court ruling in cases where the FCA intervened, which found that while commission payments were often lawful, a failure to properly disclose commission arrangements could in certain circumstances be unfair and therefore unlawful. The FCA plans to propose rules setting out how lenders should decide consistently, efficiently and fairly whether compensation is due and how much, and it will monitor compliance and take action where firms do not follow the rules. The FCA estimates most individuals would probably receive less than GBP 950 per agreement, and considers it unlikely the total scheme cost would be much lower than GBP 9 billion, with potential to reach GBP 18 billion in some scenarios. The consultation is expected to launch by early October, and if the scheme proceeds the first payments should be made in 2026. Consumers who have already complained do not need to take further action, while those concerned about undisclosed commission are encouraged to complain now; the FCA also warned that using a claims management company or law firm could cost consumers around 30% of any compensation paid.

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