The FCA has published the final details of the Motor Finance Redress Scheme. We now have a clearer picture of how this will move forward.
The FCA has set out a structured, industry-wide approach, with lenders leading the process, supported by brokers and an implementation period in place. The FCA received over 1,000 responses to their consultation and has made some changes to the proposed scheme.
The FCA aims to be fair to consumers and proportionate to firms, compensating consumers while supporting the future of the motor finance market. This should draw a line under claims regarding historic agreements across the industry, with lenders responsible for identifying impacted customers and managing any redress.
The final scheme
- The scheme covers agreements from 2007 to 2024, with around 12 million customers expected to be eligible.
- There is a change to qualifying high-commission cases: commission must now be 39% of the total cost of credit and 10% of the loan amount.
- 2 schemes will now run. Scheme 1 is April 2007 to March 2014 and Scheme 2, April 2014 up to November 2024. This is so any challenge regarding the FCA’s right to go back to 2007 does not stop Scheme 2.
- There is now a minimum commission threshold for a case to qualify for redress: £120 for Scheme 1 cases and £150 for Scheme 2.
- Other exemptions include 0% agreements and those where the broker can prove, in a DCA case, that the DCA was not acted upon.
- The overall cost to the industry is expected to be c.£7.5bn in compensation, with an average payout of c.£800–£830 per agreement. This is lower than initially projected, reflecting changes made to the final scheme.
- HP, PCP and Conditional Sale agreements are in scope. Lease and contract hire are not.
- All vehicles with an engine are included – cars, bikes, vans, motorhomes, etc.
- A new “No better deal” rebuttal is in place (Chapter 10), which is a positive change for brokers.
- An implementation period is in place until 30th June (31st August for pre-2014 agreements).
- Responsibility will sit with lenders to review and calculate outcomes.
- Brokers have a clear responsibility to support lenders by providing evidence, and the regulator will act against brokers who fail to do so.
- Brokers will have one month (plus a 14-day reminder) to fulfil any lender request.
- The approach is designed to ensure consistency across the industry, avoiding fragmented complaints processes
- Customers still have the right to go to the Financial Ombudsman Service (FOS) if they are unhappy.
How we can support you
As this is a lender-focused scheme, we do not anticipate at this time that you will be required to provide any information for agreements written through Evolution. We are well positioned for what comes next, thanks to the strength of our platform and its foundation in compliance. This means we already hold the evidence needed without requiring additional work from you.
Years of development in our platform mean compliance and transparency are built into its core, placing us in a strong position. Our platform, processes and approach are already aligned with where the industry is now. Compliance has always been part of how we operate, not something added later, and that puts us in a strong position.
We will work closely with lenders on your behalf and ensure this is handled in a structured way, keeping the impact on you as low as possible.
What if customers contact me
Customers should contact their lender directly. The FCA has published a page with lender contact details.
The FCA is also concerned about fraudsters. If a customer contacts you and is unsure whether communication from a lender is genuine or a scam, the FCA has provided a dedicated phone line for consumers to verify this: 0300 124 8899
If you have any questions in the meantime, please reach out to your Account Manager.