What the FCA's feedback on lenders' implementation plans says about scheme readiness

Important update: The FCA redress scheme is partially suspended

This article was written before recent developments around the FCA’s redress scheme. If you entered into a motor finance agreement between 6 April 2007 and 1 November 2024, please note the following:

• The redress scheme is partially suspended: The Upper Tribunal will hear four challenges to the scheme between 16 and 26 February 2027. Lenders are not currently required to calculate or pay redress, and payments are not expected to begin until 2027 at the earliest. Your lender should write to you if you have already complained and you are not owed compensation, although the FCA says some consumers may not be told until the legal process concludes.
• Revised eligibility estimate: The FCA now estimates that 12.1 million agreements are eligible for compensation, down from the 14.2 million estimated in its 2025 consultation.
• Increased compensation estimate: The FCA now anticipates average redress payouts of £829 per mis-sold agreement.
• Compensatory interest changes: The regulator has introduced a minimum 3% floor for compensatory interest; however, the rate applied to awards within the redress scheme can no longer be challenged.
• You may not hear from your lender: If the scheme proceeds, contact obligations also cover certain consumers who have not complained, including those potentially owed compensation and certain time-barred cases. If you do not hear from your lender, you could still have a valid claim but risk missing out entirely.

On 19 August 2026, the Financial Conduct Authority (FCA) published feedback on implementation plans submitted by lenders in relation to its motor finance consumer redress scheme, setting out examples of good and poor practice across six specific areas of delivery. The regulator’s redress scheme remains partially suspended, with the Upper Tribunal set to hear the legal challenges to the scheme on 14–18 December 2026 or 16–26 February 2027.

The plans the FCA has reviewed were submitted approximately six weeks after it published the final scheme rules in Policy Statement PS26/3 on 30 March 2026. Acknowledging this, the regulator said in its publication: ‘We recognise that firms may have taken significant further steps since submitting the scheme implementation plans. This guidance should, therefore, be viewed as a point-in-time assessment of the plans we reviewed.’

This is not, therefore, the FCA’s verdict on where lenders stand today, but a record of where their planning stood several months ago. The regulator also notes that approaches will vary given the differing sizes, business models and volumes of eligible agreements for each firm. Nonetheless, the FCA’s feedback is a useful barometer that is worth analysing.

What the FCA found overall

The regulator’s headline assessment was relatively positive, noting that: ‘Overall, most firms had a good understanding of the scheme’s requirements. In many cases there were high-level descriptions of the key steps needed to deliver the requirements.’

The potential concern the FCA has is in what sat beneath those descriptions. The regulator noted: ‘However, many plans were high level without detail on delivery. Some plans focused on how future plans would be developed or overseen so we were unable to assess whether firms would be able to meet their obligations.’

That the FCA, as the body responsible for supervising delivery of the scheme, could not assess whether some firms would meet their obligations is worth noting.

Population identification

The FCA’s starting position was that ‘firms need a clear and evidenced view of the numbers of customers, agreements and complaints that may be in scope.’ Examples of poor practice cited by the regulator included:

• ‘Population figures provided without explanation of methodology, assumptions or validation.’
• ‘Firms have not quantified or named the broker population that may hold relevant data. This limits their ability to assess feasibility, broker burden and likely response rates.’
• ‘Firms have no clear process for dealing with broker non-response, missing records, poor-quality evidence, data retention issues or brokers that have ceased trading or are cancelling permissions.’

A related finding by the regulator under operational readiness identified a potential consequence, noting that: ‘Firms defer key decisions on broker engagement until late in implementation. This increases the risk that relevant historic data is lost or cannot be obtained in time.’

This is potentially significant as it could directly affect lenders’ ability to identify whether you are eligible for redress and to contact you within the relevant timeframe. The FCA has alluded to this connection by noting that sound population identification ‘supports fair consumer outcomes, reduces the risk of avoidable rework, and helps firms deliver redress within expected timescales.’

Group-based decision making

This section of the regulator’s publication contains its sharpest language. The FCA noted: ‘Many firms expect to use group-based decision-making. This can support consistent and efficient processing where firms need to handle cases at volume. However, some plans did not explain the methodology, evidence or controls that would support those decisions. This is concerning where firms are relying on automated systems to process agreements at pace.’

The regulator added that weaker plans it had seen did not explain how judgment would be applied to time-barring or the use of rebuttals. It referenced examples of poor practice including group-based decisions ‘with no explanation of how cohorts will be used or evidenced’ and rebuttals or exclusions that were ‘mentioned without explaining the evidence base or decision process.’

The FCA was unequivocal about the importance of getting this correct, writing: ‘These decisions can directly affect whether consumers receive redress, so firms should be able to show how they will be made, recorded, quality assured and escalated where needed.’

This aligns with our concern that even when provided with a redress calculation under the scheme rules, a consumer has little visibility of how their lender arrived at a decision on their claim, particularly where decisions are made at volume rather than individually.

Redress calculation and payment

The regulator’s findings on how lenders will calculate and pay redress liabilities speak to the same underlying concern. The FCA noted: ‘Some plans stated that the firm would apply the FCA methodology but did not explain how that methodology would be operationalised. We also saw limited detail on validation, identity verification, fraud checks, payment controls and reconciliation.’

Many lenders intend to use a redress calculator or a calculation engine. The regulator said that stronger plans it reviewed explained the end-to-end process, including ‘data inputs, calculation steps, testing, assurance, governance, review points and how outputs would be used in consumer communications and payments.’ Less developed plans were found to feature more limited detail on the methodology, or were unclear on whether calculations would be automated, manual or a combination of the two.

Examples of poor practice cited by the FCA included:

• ‘References to calculators without explaining how they work or how they have been validated.’
• ‘Intention to use manual calculation processes without clear controls, checks or quality assurance.’
• ‘Limited explanation of how liability decisions translate into redress outcomes. For example, where commission or hybrid remedies apply.’
• ‘Insufficient detail on payment validation, identity verification, fraud checks or reconciliation.’

The regulator’s expectation is that lenders ‘should ensure they can show how a liability decision flows through to redress calculation, communication and payment’, explaining ‘how calculations will be checked, how manual activity will be controlled, and how payment risks such as fraud, incorrect payment or duplicate payment will be managed.’

Where the FCA sets out good practice in this area, it looks for evidence that calculators ‘have been tested and validated, and that firms can demonstrate calculations are accurate, consistent and auditable at scale.’

Its feedback indicates that some lenders had not yet demonstrated this at the point the regulator reviewed their plans. It is also why we have previously highlighted the importance of checking the redress figure a lender arrives at, rather than accepting it at face value.

Multiple representatives

This section of the regulator’s feedback is the most relevant to anyone who has instructed a firm to act for them. Examples of poor practice cited by the FCA included:

• ‘Failure to check whether professional representatives remain authorised and operational. In particular, where complaints have been paused for a considerable period and the representative may no longer be trading.’
• ‘Failure to cleanse and validate records to distinguish complaints from other types of customer contact, such as data subject access requests, before identifying cases involving multiple representation.’

The FCA also directed lenders back to its Dear CEO letter of 4 February 2026, in which it addressed issues around consumers with multiple representation. It adds in its publication of 19 August 2026 that, where it is unclear who is acting for the customer, ‘firms should work with the customer and the representatives’ to resolve the issue.

Potential issues with multiple representation have been exacerbated by the length of the pause in motor finance complaint handling. Consumers who instructed representatives in 2024, shortly after the regulator commenced its work investigating mis-selling via the historical use of discretionary commission arrangements, may now be represented by a firm that is no longer trading, while dealing with a lender that, based on the FCA’s findings, has not checked whether this is the case.

What remains in force during the partial suspension of the redress scheme

The Upper Tribunal order partially suspending the regulator’s redress scheme means that firms do not need to:

• calculate or pay redress; or
• send communications about compensation owed under the scheme, in line with the original scheme timetable.

Firms must continue to identify relevant complaints and agreements and gather commission and disclosure data, including from brokers, who must provide lenders with requested documents or information, or confirm they do not hold them, within one month of the lender’s request.

Lenders must also respond to consumers who have already complained and who are not owed compensation by:

• 18 November 2026, for agreements beginning on or after 1 April 2014 and where complaints had been made by 30 June 2026; or
• 18 January 2027, for agreements beginning before 1 April 2014 and where complaints had been made by 31 August 2026.

For complaints made after those dates and where no compensation is owed, the FCA says lenders ‘should tell you within 5 months of receiving your complaint.’

What happens next?

Confirmation of the dates for the Upper Tribunal to hear the challenges depends on whether any of the four challengers (Mercedes-Benz Financial Services UK, Volkswagen Financial Services (UK), CA Auto Finance UK and Consumer Voice) apply for further expert opinion or disclosure of information, and on whether these applications succeed.

The FCA has asked all firms to test whether they can evidence how the relevant population of consumers with eligible claims was identified, explain the customer journey and operational workflow, show how key decisions will be made, recorded, and quality assured, and explain how redress will be calculated, checked, and paid. The regulator has said it will continue to engage where concerns remain and that ‘some firms may receive individual feedback or be asked to provide further detail where their plans do not demonstrate sufficient readiness.’

You do not need to instruct a representative to claim compensation via the FCA’s motor finance redress scheme and can complain and receive any compensation you are owed at no cost, although there may be several benefits to doing so.

Register your claim with Harcus Parker here.