7:58 am, March 11, 2025
The Financial Conduct Authority (FCA) has doubled down on the likelihood of consulting on a redress scheme as an outcome from the motor finance scandal.
The watchdog has previously said it was considering a formal redress scheme for people who may have been overcharged for motor finance discretionary commission arrangements (DCA).
But, in new statement, it has both reiterated this, saying that it will confirm its next steps within six weeks of the decision from the upcoming Supreme Court case.
‘We’re seeking to understand if firms failed to comply with requirements relating to DCAs and if consumers lost out as a result,’ the FCA statement said. ‘If they have, we want to make sure consumers are appropriately compensated in an orderly, consistent and efficient way.’
The FCA began its probe into motor finance in January 2024, investigating historical cases of motor finance firms not paying out compensation to customers over now-banned commission arrangements.
On top of this, the motor finance industry was rocked by a landmark Court of Appeal judgement in October 2024, which ruled in favour of three consumers fighting cases against finance firms Close Brothers, Firstrand Bank and Motonovo.
It involved complaints about discretionary and non-discretionary commission arrangements (non-DCAs).
Next month, the Supreme Court will hear an appeal against the Court of Appeal’s judgement.
Now, the FCA has said if the decision from the Supreme Court’s hearing is taken into account, it could consult on a formal redress scheme.
‘We want to provide as much certainty as possible to firms, consumers and stakeholders,’ the FCA statement said. ‘So, we are confirming that if, taking into account the Supreme Court’s decision, we conclude motor finance customers have lost out from widespread failings by firms, then it’s likely we will consult on an industry-wide redress scheme.
‘We previously said it is more likely than when we started our review that we will introduce an alternative way of dealing with complaints.’
If a redress scheme is put in place, finance firms would be responsible for determining whether customers have lost out due to their failings.
Companies would then have to offer ‘appropriate compensation’ and follow rules and checks put in place by the FCA.
Commenting on its next steps after the Supreme Court hearing, the FCA said: ‘We are no longer planning a further announcement in May. Instead, we will confirm within six weeks of the Supreme Court’s decision if we are proposing a redress scheme and if so, how we will take it forward.
‘The Court of Appeal case involved complaints about discretionary and non-discretionary commission arrangements (non-DCAs). Our next steps on non-DCA complaints will also be informed by the outcome of the Supreme Court case.
‘Depending on the Supreme Court’s decision, we may also consult separately on changes to our rules.
‘Throughout our work, we will continue to consider how to make sure affected consumers are appropriately compensated and the motor finance market continues to work well, with effective competition, for the millions of consumers who rely on it every year.’
