The Financial Conduct Authority has published proposals for an industry-wide compensation scheme to pay redress to motor finance customers affected by unlawful non-disclosure of key information, with payouts potentially starting in 2026. The FCA estimates around 14 million agreements could be in scope, with average compensation of about GBP 700 per agreement and around GBP 8.2bn of total compensation based on expected participation. The proposed scheme would cover motor finance agreements entered into between 6 April 2007 and 1 November 2024 where commission was payable by the lender to the broker. Compensation would be payable where customers were not told details of at least one of three lender-broker arrangements: a discretionary commission arrangement allowing the broker to adjust the customer’s interest rate to obtain a higher commission, a high commission arrangement (35% of the total cost of credit and 10% of the loan), or a contractual tie granting exclusive or near-exclusive rights for the lender to provide credit. Where evidence is missing about what was disclosed, lenders would have to presume borrowers were not given enough information, with limited scope for a lender to show there was no unfairness despite non-disclosure. Operationally, lenders would contact customers who have already complained once the scheme is live and proceed to review if there is no response after one month, while customers who have not complained would be contacted within six months of the scheme starting and would have six months to opt in. Borrowers not contacted (including where lenders cannot trace them) would have one year from the scheme start to make a claim directly. The FCA would monitor compliance and the Financial Ombudsman Service would assess disputes about whether the scheme rules were followed; consumers could also choose to go to court instead of using the scheme.

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