On 7 October 2025 the Financial Conduct Authority published consultation paper CP25/27, setting out its proposals for an industry-wide Consumer Redress Scheme to address motor finance mis-selling.
The proposed scheme
The FCA proposed a mandatory scheme covering PCP and HP agreements between April 2007 and November 2024, structured around three triggers: undisclosed Discretionary Commission Arrangements, high undisclosed commission, and undisclosed tied or exclusivity arrangements.
Initial FCA modelling estimated 12.1 million agreements in scope and total redress of around £7.5 billion, with an average payout of approximately £700 per agreement.
What the consultation meant for consumers
The consultation set out how the FCA proposed to require lenders to assess and pay redress without consumers needing to prove individual financial harm. Under the proposed scheme, eligible customers would be contacted proactively by their lender and assessed against defined criteria covering PCP and HP agreements.
Consumers with agreements from the scheme period could submit a complaint to their lender or register with a regulated law firm at any point during the consultation period. The complaint handling pause remained in place while the FCA finalised its approach, meaning lenders were not required to issue final responses until the rules were confirmed.
What changed after the consultation
The consultation closed on 18 November 2025. The final rules, published in March 2026 as Policy Statement PS26/3, revised the interest rate calculation methodology in consumers' favour, increasing the average expected payout from approximately £700 to £829 per agreement.
What happened next
Following publication of the final rules in March 2026, four parties lodged legal challenges in the Upper Tribunal. The FCA is planning for compensation offers to begin in mid-November 2026 at the earliest, subject to the outcome of those proceedings.