The Financial Conduct Authority (FCA) has confirmed it may consult on an industry-wide redress scheme for motor finance customers who were mis-sold loans under discretionary commission arrangements (DCAs).
The regulator is reviewing past practices to assess whether firms failed to comply with disclosure requirements, potentially leading to consumer losses.
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The review follows a Court of Appeal ruling that raised the prospect of widespread liability for motor finance firms where commissions were not properly disclosed. The Supreme Court is set to hear an appeal on the matter from 1 to 3 April, with the FCA granted permission to intervene in the case.
In light of the legal proceedings, the FCA has stated that, should it conclude that widespread failings led to consumer harm, it is “likely” to propose a redress scheme. Such a scheme would require firms to determine whether customers had suffered losses due to non-compliance and to offer appropriate compensation. The FCA would establish the rules governing the process and oversee compliance.
The regulator argues that a structured redress scheme would be simpler for consumers than individual complaints, reducing reliance on claims management companies (CMCs) and ensuring that those affected receive full compensation. It would also provide firms with a more orderly and efficient resolution process.
The FCA had originally planned to make a further announcement in May but now intends to confirm within six weeks of the Supreme Court’s ruling whether it will proceed with a redress consultation. The Court of Appeal case also involved non-discretionary commission arrangements (non-DCAs), and the FCA’s next steps regarding these complaints will be informed by the Supreme Court’s decision.
Depending on the outcome, the regulator may also consider consulting on broader rule changes. The FCA has reiterated its commitment to ensuring affected consumers are compensated appropriately while maintaining a well-functioning and competitive motor finance market.
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