FCA publishes final motor finance compensation rules today, covering 12.1 million agreements and an estimated £7.5 billion in consumer payouts, with lenders retaining the right to challenge

The Financial Conduct Authority (FCA) is publishing its final rules today for a mass consumer compensation scheme covering 12.1 million motor finance agreements made between April 2007 and November 2024. The regulator previously estimated that 44% of all motor finance agreements in that period would be eligible, with average payouts of approximately £830 per agreement — implying a total consumer redress figure of around £7.5 billion, with lenders facing an additional £3 billion in administrative costs. The scheme covers three arrangements a consumer must not have been told about to be eligible: a 'discretionary commission arrangement' (DCA), where dealers set the interest rate and earned higher commission for higher-rate agreements; a high commission arrangement (at least 39% of the total cost of credit and 10% of the loan); and a tied arrangement, where the dealer used one lender or gave one lender a right of first refusal. The FCA designed the scheme as a centralised, court-free redress mechanism to avoid the need for millions of individual claimants to litigate — a lesson drawn from the PPI (payment protection insurance) mis-selling scandal, which took over a decade to resolve through a mixture of regulatory and judicial processes. Major lenders including Lloyds Banking Group — the UK's largest retail bank — have already set aside billions of pounds in provisions. Close Brothers has cut hundreds of jobs in direct response to its motor finance exposure. The scheme may still face a legal challenge from lenders or claims management companies, which could extend the wait for consumers. Today's publication follows a UK Supreme Court ruling earlier in the saga that shaped the legal framework for assessing lender liability.

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