With a possible FCA-mandated redress scheme on the horizon, motor finance firms must act swiftly and strategically. From data integrity to governance frameworks, this article outlines six critical priorities to help organisations stay ahead of the curve — and avoid costly delays.
As the motor finance industry awaits the Supreme Court’s judgment on historic commission arrangements, the Financial Conduct Authority (FCA) has indicated that it will confirm within six weeks if it proposes to mandate a consumer redress scheme.
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Drawing on the FCA’s public statements and our internal industry insights, this article outlines six critical priorities motor finance Firms should focus on to ensure that they are institutionally ready for what could be one of the most significant consumer remediation exercises in recent UK financial history. The time to prepare is now.
1. Understand your data sources, gaps, and integrity
At the heart of any redress scheme lies data. When a redress scheme is mandated, Firms will need to assess whether customers were harmed by commission arrangements, likely within a pre-defined ‘Relevant Period’ and, if so, calculate redress accordingly. This requires a deep understanding of historical data – some of which may date back to 2007.
Key questions firms should be asking now include:
- What data points are needed to assess a claim? For example, counterfactual cashflows, commission structures, and customer disclosures
- Where is this data stored? Is it digital, archived, or in hard copy? Where is it located?
- Is the data complete and accurate? Are there gaps that need to be filled or inconsistencies that need to be resolved?
- Can you quickly build a contact list of in-scope customers? This includes verifying addresses and tracing customers who may have moved or passed away.
Given the length of time that an FCA remediation scheme has been on the horizon, there is unlikely to be a large amount of sympathy afforded for delays due to data retrieval and cleansing.
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By GlobalData2. Redress process design is iterative and takes time
Designing a redress process is not a one-off task – it is a dynamic, evolving process. The FCA has indicated that any scheme will be principles-based rather than rooted in a basic counterfactual cashflow review. Meaning that Firms will likely need to tailor their approach to their specific commission models and customer bases.
Initial frameworks will almost certainly undergo multiple iterations as Firms and the FCA build a shared understanding of what fair redress looks like.
3. Scope and eligibility: plan for multiple scenarios
One of the most challenging aspects of any redress scheme is defining who is in scope and who is eligible.
- Scope refers to whether a complaint relates to a Relevant Commission Arrangement during the Relevant Period
- Eligibility considers whether the complainant is entitled to redress (for example, are they the original customer, a legal representative, or a CMC?), and if so, how the scheme might engage with them
Firms should develop contingency plans for different scenarios. Also, a robust eligibility filter can help avoid double compensation and ensure consistency.
4. Prepare to design a process map that accommodates split complaints
Split complaints – where a single customer has submitted a complaint concerning both in-scope and out-of-scope acts or omissions – pose a unique challenge.
Firms should:
- Define what constitutes a split complaint
- Design a process map that clearly delineates how such cases will be handled
- Ensure compliance with DISP (Dispute Resolution: Complaints) rules for regulated products, while developing DISP-adjacent processes for in-scope complaints.
5. Consider a strong project governance framework
No redress scheme can succeed without robust governance. This includes:
- A dedicated Project Management Office to track progress, manage risks, coordinate across functions, and manage resources in a lean and agile way
- A project board to provide strategic oversight and challenge
- A complex case committee to handle nuanced or precedent-setting complaints
- Legal and risk teams experienced in overseeing FCA mandated redress schemes to provide second and third lines of defence
Firms should take care in engaging consulting firms to design and deliver a redress scheme. Firms should instead consider the benefit of engaging a law firm to support them in designing, delivering, and risk assure a redress scheme, which will provide all the specialist capabilities required, with the addition of providing an appropriate veil of legal privilege over aspects of the investigation of the complainants, programme design and decision making.
6. Remember, a redress programme is not a change programme
A redress scheme is a unique type of programme. The one thing to fix at the forefront of your thinking is that a redress programme is not a change programme. When redress programmes are designed and delivered by change managers, there are three certain risks – the programme will:
- Overrun
- Overspend
- Be overly complicated
This approach would be wholly at odds with the FCA published principles of timeliness, simplicity and cost effectiveness. When engaging external expertise, firms should satisfy themselves that they are engaging firms with demonstrated experience in designing and delivering large-scale remediation programmes.
Conclusion: readiness is a strategic advantage
The FCA has made it clear that it wants to move quickly once the Supreme Court delivers its judgment. Firms that wait for certainty before acting risk being left behind.
By focusing now on locating data, data integrity, process design, eligibility criteria, complaint mapping, and governance, motor finance Firms can position themselves not only to comply with a future redress scheme, but to lead it.
The road ahead may be uncertain, but the direction is clear. Readiness is no longer optional – it is a strategic imperative.
Wayne Gibbard is a Partner at Shoosmiths. Peter Richards-Gaskin leads on Financial Services Disputes, Remediation, and Investigations as a Partner at the firm.
