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Motor Finance Compensation Scheme consultation extended but preparation remains critical
The FCA’s long-awaited consultation on the motor
13/11/25
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What the FCA’s new motor finance redress scheme means for you
The FCA’s long-awaited consultation on the motor finance redress scheme, published on the 7th October, marks one of the most significant regulatory developments for the sector in recent years. After months of anticipation, firms now have greater clarity on the scope, methodology and expectations that will shape the industry’s response.
To explore the practical implications, TCC Group hosted a webinar, Redress roadmap: What the FCA’s new Motor redress scheme means for you. TCC, Momenta and Recordsure’s Chief Product Officer and Chief Commercial Officer, Garry Evans, was joined by Momenta UK’s Head of Operations, Mike Morris, to examine:
- what the FCA’s consultation reveals,
- the operational realities motor finance firms are likely to face,
- the steps firms should take to prepare effectively.
An overview of the motor finance industry sentiment
A live poll at the start of the session reflected a broadly pragmatic industry mood. Over half of respondents (57%) said the consultation landed as expected, while 29% found it worse than anticipated and 14% thought it was better.
This mix of relief and caution captures how many lenders and brokers are feeling: glad to finally have detail after months of uncertainty, but acutely aware of the operational and data challenges that the scheme now presents.
Scope, timelines and operational demands
The FCA’s consultation confirms that the scheme will encompass all discretionary commission arrangements (DCAs) and other high-commission models, as well as cases where lenders had exclusive arrangements with brokers and dealers. It will apply to agreements dating back as far as 2007, with firms expected to locate, verify and analyse data that may be nearly two decades old.
Strict timelines are also proposed for engaging with customers. Firms will need to contact existing complainants within three months of the scheme’s launch, giving them a further month to opt out. All other affected customers must be contacted within six months and the overall window for raising a complaint will close after twelve months.
Although the consultation runs until the 18th November 2025, the FCA intends to launch the scheme in early 2026 – a tight timeframe for what will be a large-scale and resource-intensive process. In parallel, the regulator plans to run a national advertising campaign to raise consumer awareness, which could generate significant volumes of enquiries well before the scheme formally begins.
Behind the numbers
While the FCA has positioned the scheme as straightforward and automatable, the underlying data tells a different story. The regulator’s own estimates suggest operational costs of £2.8 billion, excluding the redress payments themselves – equating to roughly £240 per agreement for the 11.7 million customers thought likely to opt in o the redress scheme.
This scale highlights the multifaceted nature of the work involved. Automation may handle a portion of the redress calculations but manual intervention will still be needed across key stages such as legacy data retrieval, validation, tracing customers, handling deceased estates and managing those cases where collections and/ or enforcement activity was involved. Firms will need flexible and auditable systems, scalable resourcing models and strong governance to maintain accuracy and fairness throughout the process.
Readiness varies across the industry
The second live poll during the webinar revealed that firms’ preparedness levels differ widely (as indicated by the small sample of participating firms). When asked to select all of the options that apply to them, half of the poll participants said they had reviewed and verified their data availability, and a third had begun identifying in-scope customers. However, only 17% of those answered had developed a tracing and contact strategy, and none reported having systems ready to apply the redress calculations automatically. Half of the respondents said they had not yet started any preparation.
The findings suggest that while some firms are already laying the groundwork, many remain in the early planning stages. Given the likely complexity of implementation, waiting until the consultation closes could leave firms struggling to meet the FCA’s demanding timelines.
Early preparation will be essential
Across the discussion, one message stood out clearly: firms that invest in early preparation will be in a far stronger position once the final rules are confirmed. The first priority should be understanding the completeness, accessibility and quality of data going back to 2007.
From there, firms should begin designing their tracing and communication processes to ensure they can reach affected customers efficiently within the required timeframes. Establishing the right balance between automation and manual review will be critical, supported by robust quality assurance and oversight mechanisms.
Modelling potential exposure under the FCA’s proposed redress calculation will also help firms plan their financial and operational response, while ensuring contact centres and back-office teams are equipped to handle higher complaint volumes. Securing the resource you need early is key, so that you’re prepared before the inevitable rush of an industry-wide redress scheme.
What comes next
The consultation period gives firms a valuable but limited window to get their data, systems and processes ready. Many details remain to be finalised; the direction of travel is now clear. The redress scheme will test the industry’s ability to combine technology, operational efficiency and regulatory precision at scale.
Firms that act early will reduce their implementation risk and also demonstrate proactive compliance and protect customer trust during what promises to be a highly visible regulatory programme.
Supporting your redress readiness
We know the FCA’s timeline is putting pressure on firms across the motor finance sector. But there’s no need to wait. Prepare your firm now with one of our two practical, free offers:
1. Our redress tech workflow is already live and proven
With over one million cases processed through our purpose-built motor finance redress workflow, powered by iQcodex.
The firms working with us have already:
- Rapidly analysed their complex datasets
- Scanned and prepared their agreements and documents for review
- Defined their scope determination, tracing and customer contact strategies
- Positioned themselves to plug in redress calculations and payment processes as soon as the FCA finalises its plans
With this groundwork already complete, they’re ready to act the moment the regulator makes its next announcement – no delays, no wasted time.
2. Deep dive into your redress strategy
If you want to move beyond readiness and map out a clear, efficient plan for managing redress reviews, our half-day workshop is designed for you. Tailored to your firm’s needs, it covers everything from validating your regulatory approach and reviewing sales documentation to testing redress calculations, exploring cost-effective resource strategies, and modelling key scenarios.
Get the expert guidance you need to ensure your processes are robust and FCA-ready with our half day workshop.
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