FCA Refines Motor Finance Redress Scheme After Latest Review - 18 February 2026

On the 18th February 2026, media reports confirmed that the Financial Conduct Authority (FCA) is preparing updates to its proposed motor finance redress scheme that could ease some obligations on carmakers’ finance arms, known as captive lenders. This follows widespread consultation responses from lenders, automotive manufacturers and industry groups on the draft scheme design.

The redress programme was first proposed to address historic concerns about how commission arrangements were disclosed in regulated motor finance agreements, particularly Personal Contract Purchase (PCP), Hire Purchase (HP) and conditional sale agreements entered into between 6 April 2007 and 1 November 2024.

Background To The Redress Scheme

The FCA opened consultation on an industry-wide redress scheme in October 2025 under Consultation Paper CP25/27. It followed the Supreme Court’s 2025 ruling reaffirming that undisclosed or poorly disclosed commission arrangements can contribute to unfair relationships between lenders and borrowers.

The proposed scheme is intended to provide a consistent way to compensate customers who may have been treated unfairly, avoiding the need for individual court actions or complaints on a case-by-case basis. According to regulatory estimates, around 14 million agreements could be within scope. The FCA’s modelling published during consultation suggested that total redress costs could be around £8.2 billion, while overall industry costs, including implementation, might reach £11 billion.

What The 18th February Update Reports

Recent financial news coverage, including the Financial Times, indicates that the FCA is considering revisions that could reduce the burden on captive lenders, finance arms owned by car manufacturers, compared with independent lenders. Captive lenders, such as those linked to major brands, were estimated to account for a significant share of the potential liabilities under earlier proposals.

Reports suggest that the FCA may adjust how captive lenders contribute to compensation where the finance offered was at low or promotional interest rates and customers were not disadvantaged by the commercial relationship between lender and dealer. The regulator has stated it is “carefully considering feedback” and that final decisions on scheme rules have not been taken.

It is important to note that this update comes before the FCA has published its final policy. Any changes will be set out in the formal final rules, expected later in 2026. Until then, the proposals remain under active consultation and assessment by the regulator.

Core Elements Likely To Remain

Despite potential changes in how captive lenders are treated, the core rationale for the scheme remains:

• Providing orderly, consistent compensation for consumers treated unfairly due to insufficient commission disclosure.
• Applying to regulated PCP and HP agreements taken out between 2007 and 2024.
• Requiring lenders to identify affected customers and calculate redress under FCA-approved methodologies.

The FCA’s consultation explored multiple methods for calculating redress based on commission repayment, interest adjustments or hybrid approaches. These methods aim to reflect the difference between what a customer paid and what they might have paid had the commission been transparent and fair.

What This Means For Consumers

For consumers, the regulator’s update does not change the basic principle of the proposed redress scheme, which is to provide compensation where agreements were not transparent. Complaints can still be made directly to lenders, and if a final response is unsatisfactory, disputes can be referred to the Financial Ombudsman Service free of charge.

The FCA’s timeline published during consultation indicated that if a redress scheme is introduced, consumers could begin receiving compensation before the end of 2026, once final rules are in place and implementation is underway.

While the regulator explores refinements to the scheme, anyone who believes their finance agreement may have been mis-sold because interest rates or commission arrangements were not clearly explained may want to:

• Review their original finance documents
• Check how commission and interest rates were presented
• Consider submitting a complaint to their lender

Industry Reaction and Next Steps

Industry responses to the consultation have highlighted concerns about the scale of potential liabilities and the methodology for assessing unfairness and redress. Some lenders and carmakers have argued that certain types of finance, particularly low-rate promotional products, should not attract the same redress obligations as other arrangements.

The FCA’s public stance is that it is reviewing feedback and has not yet made a final decision, suggesting that the final motor finance redress scheme will balance consumer redress with wider market impacts. Final policy and rules are expected later in 2026.

If you think you may have been mis-sold on your car finance or are unsure on any of your past agreements, you can use Mis-Sold Experts claim checker to find out if you are eligible for compensation.