What happened?
The FCA has announced an update to its Motor Finance Compensation Scheme consultation, extending the consultation period from 18 November 2025 to 12 December 2025.
The regulator has also confirmed that final rules are expected to be published in February or March 2026, at which point the compensation scheme will formally begin.
Importantly, the FCA has emphasised that firms must maintain momentum in their preparations. In its statement, the regulator noted that complaints cannot be paused indefinitely and highlighted the importance of providing certainty to customers, the market and investors while supporting confidence in the motor finance sector.
Why does it matter?
Although the extension provides firms with additional time to prepare, it should not be viewed as a delay to implementation. The FCA has already provided guidance on which agreements fall within scope, how redress should be calculated and the expectations around delivery and governance.
As firms move closer to implementation, attention is shifting from understanding the rules to demonstrating operational readiness. Effective governance, clear accountability and accurate remediation processes will be essential to delivering fair customer outcomes and meeting regulatory expectations.
Who is affected?
Motor finance lenders, firms involved in historic motor finance agreements, remediation and redress teams, compliance functions, operational leaders and governance teams are all likely to be impacted by the upcoming scheme.
Firms with large volumes of historic agreements or fragmented customer and finance data may face additional preparation challenges as they work to identify eligible cases and design scalable redress processes.
Key risks
- Delaying remediation planning in response to the consultation extension.
- Incomplete or poor-quality historical agreement data.
- Insufficient governance and oversight arrangements.
- Operational bottlenecks caused by manual remediation processes.
- Inconsistent customer outcomes resulting from unclear procedures.
- Resource constraints affecting delivery at scale once the scheme launches.
Actions to take
- Review motor finance agreements to identify records potentially within scope.
- Assess data quality and address gaps that may impact redress calculations.
- Design and test remediation processes ahead of final rules.
- Establish clear governance structures, accountability and reporting mechanisms.
- Evaluate where automation can improve efficiency while maintaining quality assurance.
- Build internal capability through training, resource planning and scenario testing.
Wider implications
The FCA’s latest update reinforces a broader regulatory trend towards operational accountability and evidence-based remediation. Regulators increasingly expect firms not only to calculate redress accurately but also to demonstrate strong governance, transparent decision-making and fair customer treatment throughout the remediation process.
For many firms, preparation for the Motor Finance Compensation Scheme could become a catalyst for improving data management, strengthening operational resilience and enhancing customer remediation capabilities more broadly.
Recommendations
Firms should use the extended consultation period to strengthen their readiness rather than postpone planning activities. Focus should remain on three key priorities:
- Identify agreements in scope by reviewing regulated motor finance agreements and confirming potential eligibility.
- Design effective remediation processes that balance efficiency, accuracy and customer fairness.
- Implement robust governance and oversight with clear accountability, decision-making frameworks and transparent reporting.
Successful firms are likely to be those that combine technology-enabled efficiency with specialist expertise, ensuring redress can be delivered accurately, consistently and at scale.
Supporting sources
Frequently asked questions
Has the Motor Finance Compensation Scheme been delayed?
What should firms be doing now?
Firms should identify agreements that may fall within scope, assess the quality of customer data, develop remediation processes and strengthen governance arrangements to ensure readiness.
Why is governance such a key focus?
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- Lending & Consumer CreditTCC helps consumer credit firms evidence good outcomes, strengthen affordability and vulnerability frameworks, and manage complaints, remediation and regulatory risk. We support lenders with practical, regulator-ready compliance programmes that improve governance, customer treatment and operational resilience.
- Motor FinanceTCC helps motor finance lenders, brokers and providers assess redress exposure, prepare for large-scale customer reviews and strengthen complaints, affordability and Consumer Duty frameworks. We combine regulatory advisory, managed operations, specialist resource and technology-enabled assurance to deliver consistent customer outcomes, robust governance and regulator-ready evidence under heightened FCA scrutiny.
Reviewed by TCC Group Editorial Team