FCA's Motor Finance Compensation Scheme Likely To Include Implementation Period

The Financial Conduct Authority (FCA) has said its proposed motor finance compensation scheme is likely to include an implementation period. The regulator says this is intended to give firms time to prepare and help ensure any compensation owed to consumers can be delivered efficiently.

The update forms part of the FCA’s ongoing work on historic motor finance commission arrangements. These arrangements relate to the way some dealers or brokers were paid when arranging car finance agreements.

The FCA confirmed it is reviewing more than 1,000 responses to its consultation on the proposed redress scheme. Final decisions have not yet been made, but the regulator expects to publish final rules in late March 2026.

What the FCA has announced

If the FCA proceeds with a scheme, it says several changes may be introduced to streamline the process for both consumers and firms.

Key points highlighted by the FCA include:

• Implementation period: likely around 3 months, with up to 5 months for older agreements while firms prepare their systems and processes.
• Existing complaints: consumers who have already complained may automatically move into the scheme rather than needing to opt out.
• Accepting compensation offers: customers could be able to accept a redress offer immediately once it is made.
• Customer communication: firms may be allowed to contact customers through several communication channels rather than relying on recorded delivery letters.

The FCA said that even with an implementation period, streamlining the process could mean millions of consumers receive compensation during 2026.

Why the FCA is considering an implementation period

The FCA has described the proposed redress scheme as large and complex. Firms may need time to review large numbers of historic motor finance agreements and identify those that fall within the scope of the scheme.

Preparation time may involve firms:

• identifying agreements that included commission payments
• reviewing historic commission structures
• building systems to calculate compensation
• setting up processes for contacting customers

The regulator says an implementation period could help ensure the compensation process works smoothly once it begins.

What this means for drivers with car finance agreements

The proposed scheme relates to historic motor finance agreements where commission arrangements between lenders and dealers or brokers may not have been clearly explained to customers.

These agreements often include common car finance products such as:

• Personal Contract Purchase (PCP)
• Hire Purchase (HP)
• Conditional Sale agreements

Not every agreement will necessarily qualify for compensation. Each case would need to be assessed based on the terms of the agreement, the commission structure used and the information provided to the customer at the time.

Checking your motor finance agreement

If you had a car finance agreement arranged through a dealership or broker, it may be helpful to review the details of the agreement and how commission was disclosed.

Mis-Sold Expert provides information and tools that can help you understand whether your agreement may fall within the types of arrangements currently being examined by regulators.

You can also choose to check your motor finance agreements with Mis-Sold Expert, which can help you understand whether the agreement may be worth investigating further.

What happens next

The FCA says final decisions about the compensation scheme have not yet been made. Once consultation responses have been reviewed, the regulator expects to publish final rules in late March 2026.

If the scheme proceeds, lenders would then begin reviewing historic agreements and contacting customers who may have been affected.

Consumers who have questions about how commission worked in their car finance agreement may wish to review their documents or seek further information about their options.

How Mis-Sold Expert Can Help

Mis-Sold Expert informs consumers about potential issues with motor finance agreements, including PCP and hire purchase. We explain how commission structures work, why regulators have raised concerns and the steps you can take if you want to review your agreement. You can find all the information you need across our website and blogs. Additionally, you can contact us on 0161 567 8822, and a member of our team will help you find the information you need.

You can claim without using a claims management company; you can go to your finance provider and then to FOS, for free. Additionally, the FCA is introducing a free consumer redress scheme.