The Motor Finance Redress Scheme: What It Means for Car, Van and Motorbike Dealers

Last updated 29 September 2026.

If you arranged finance for customers at any point between 2007 and 2024, the FCA’s motor finance redress scheme affects your business, even though lenders pay the compensation. What lands on your desk is record requests with a one-month deadline, complaints to pass on, questions from customers, and possibly a lender trying to recover costs from you. This guide explains what the scheme is, where it stands, and what a dealer who acted as a credit broker should do now. Customers looking for their own claim will find a short section at the end.

This is general guidance based on FCA publications and court documents as of September 2026, not legal advice. The scheme is under legal challenge and the position is moving quickly, so check the linked FCA pages and speak to your compliance adviser or solicitor before you act on any detail.

What is the motor finance redress scheme?

The motor finance redress scheme is an FCA scheme that makes lenders compensate customers who were not told about certain commission arrangements between the lender and the dealer or broker. It covers regulated motor finance agreements taken out between 6 April 2007 and 1 November 2024 (FCA: FCA confirms motor finance redress scheme).

It is actually two schemes. Scheme 1 covers agreements from 6 April 2007 to 31 March 2014, and Scheme 2 covers agreements from 1 April 2014 up to and including 1 November 2024. The rules came into force on 31 March 2026 (FCA: further information for firms on the scheme).

A customer is only owed compensation if they were not told clearly about one of three arrangements:

• A discretionary commission arrangement (DCA), where the broker could set the interest rate to earn more commission.
• High commission, meaning commission of at least 39% of the total cost of credit and 10% of the loan.
• A tied arrangement, where the broker was contractually tied to one lender or gave a lender first refusal. There is a limited exception where the lender can show the lender, manufacturer and franchised dealer were visibly linked, for example by shared branding.

Small cases are excluded, including commission of £120 or less before April 2014 or £150 or less after, and interest-free agreements. The FCA estimates 12.1 million agreements are eligible, with a total cost to firms of £9.1 billion, £7.5 billion of it redress, and an average payout of around £829 per agreement (FCA).

Vans and motorbikes are in scope too. The FCA’s consumer guidance lists cars, motorbikes, vans and campervans, and excludes personal contract hire (FCA: car finance claims). The scheme uses the Road Traffic Act definition of a motor vehicle, a mechanically propelled vehicle intended or adapted for use on roads, and the FCA tells lenders to take their own legal advice on borderline cases (FCA: further information for firms, 1.3). If you sell towed caravans on finance, ask your lenders how they are treating those agreements.

What is a discretionary commission arrangement?

A discretionary commission arrangement let the dealer set the customer’s interest rate within a range the lender allowed, and the higher the rate, the more commission the dealer earned. The FCA found this gave brokers an incentive to act against customers’ interests, announced a ban in July 2020, and the ban took effect on 28 January 2021 (FCA: ban on motor finance discretionary commission models).

One detail matters for dealers. If a DCA was in place but you charged the lowest rate in the range, the one at which you earned no discretionary commission, the scheme does not treat the DCA as a relevant arrangement. The lender has to show that from objective evidence, which usually means your records (FCA: further information for firms).

How the car finance scandal reached a redress scheme

The scheme follows the FCA’s review of motor finance commission and the Supreme Court’s judgment of 1 August 2025 in Hopcraft, Johnson and Wrench ([2025] UKSC 33). The court found that a dealer arranging finance does not owe the customer a fiduciary duty, so the lenders won most of the appeal. But it upheld Mr Johnson’s claim that his relationship with the lender was unfair under section 140A of the Consumer Credit Act 1974 (UK Supreme Court: press summary).

Mr Johnson’s commission was 25% of the amount borrowed and 55% of the total charge for credit, it was not disclosed, and his documents suggested the dealer chose from “a select panel of lenders” when the lender had a right of first refusal. The court called the size of the undisclosed commission “a powerful indication” of unfairness.

The FCA published its final rules in policy statement PS26/3 in March 2026 (FCA: PS26/3).

Where the scheme stands in September 2026

As of September 2026, the scheme is partly suspended. On 2 July 2026 the FCA confirmed the Upper Tribunal had suspended parts of it while four challenges are heard: from Consumer Voice (represented by Courmacs Legal), Volkswagen Financial Services, Mercedes Benz Financial Services and Crédit Agricole Auto Finance (FCA: motor finance scheme partially suspended).

During the suspension, lenders do not have to calculate or pay compensation, or contact customers who are owed money. Everything else still applies, including gathering commission and disclosure data from brokers. Brokers must still answer lender requests within one month.

The tribunal will hear the challenges on 14 to 18 December 2026 or 16 to 26 February 2027, depending on applications for expert evidence or disclosure. The FCA says that if the scheme is upheld and the judgment is not appealed, it expects payments to begin in 2027. If it had to consult on a revised scheme, compensation could be delayed until 2028 or beyond.

Some reports say the scheme “starts” in December or February. Those are hearing dates, not a launch date.

Who pays: lenders, and when dealers are exposed

Lenders administer the scheme and pay the redress, not the dealer. But the rules also say the scheme is “without prejudice to any rights of indemnity or contribution a lender may have against a credit broker” under their contract or the Civil Liability (Contribution) Act 1978 (FCA: PS26/3, CONRED 5.1.7G).

In PS26/3 the FCA noted lenders’ calls for brokers to contribute, and said lenders may seek restitution from brokers where the broker was responsible for non-disclosure, as long as this does not delay redress to customers. So your exposure depends on three things:

1. Your terms of business with each lender. Look for indemnity clauses and any disclosure duties the lender put on you.
2. Who was responsible for disclosure. The FCA’s point about restitution is aimed at cases where the broker was responsible for non-disclosure.
3. Changes to your firm. The FCA says it is watching for firms trying to avoid redress liabilities, and checks complaints are resolved before approving a cancellation of permissions (FCA: further information for firms, section 8).

If you are an appointed representative, your principal firm is responsible for your credit broking, so talk to them first. Our guide to the legal requirements for running a used car dealership explains the difference between limited permission, full permission and appointed representative status.

What lenders can ask you for, and how fast

A lender that does not hold the records it needs must ask the broker, and you have one month to answer. Under CONRED 5.2.28R a credit broker must “conduct a thorough search of its systems” and, within the deadline, either send the information in the format requested (or a reasonable format if that is not practical) or confirm it does not hold it. If you do not reply or only partly reply, the lender must chase you and give you a further 14 days (FCA: PS26/3).

The FCA kept the one-month limit despite brokers’ concerns about volumes and old records, and said brokers will be supervised (FCA: PS26/3). The deadline still applies during the suspension (FCA: information for firms).

Practical steps:

• Name one person to receive lender requests and diary each one-month deadline.
• Find out now where your old finance paperwork lives: filing boxes, an old DMS, the lender’s own broker portal.
• If you do not hold something, say so in writing. That is a valid answer.
• If you closed, merged or bought another dealership, work out who holds the old records.

What records to keep

Keep anything that shows what commission you were paid, how rates were set and what the customer was told. The scheme rules list the records lenders may use, and many sit with the dealer (FCA: PS26/3, CONRED 5 Annex 1):

• Lender rates and terms and terms of business, including commission arrangements, minimum and maximum rates, and any ties.
• Financial records showing the commission paid on each agreement.
• Any arrangements with a manufacturer, if you were a franchised dealer.
• The customer file: your initial disclosure document, the finance agreement, pre-contract documents, correspondence, file notes and any creditworthiness assessment.
• System records or screenshots made at the time, showing what information the customer was given.

Under earlier complaint rules, brokers were already expected to keep records showing whether an agreement had a DCA (if it ended on or after 11 January 2018) or another relevant arrangement (on or after 20 December 2018). Don’t throw away old finance files while the scheme is running.

Complaints that come to you

If a customer complains to you about finance commission, forward the complaint to the lender and tell the customer you have done so. CONRED 5.1.9R requires both. Complaints about anything outside the scheme, such as the car’s condition, you still answer yourself in the usual way (FCA: PS26/3). For those, our guide to the Consumer Rights Act for used car dealers covers faulty goods.

The FCA suggests customers who don’t know their lender contact the dealer (FCA: car finance claims), so expect those calls.

How customers will be contacted

Lenders, not dealers, contact customers. The scheme is opt-in: lenders write to customers who are owed money, and those customers have six months to respond. Customers who are not contacted can still complain to their lender by 31 August 2027 (FCA).

The suspension changes the order. As of September 2026, lenders are not contacting people who are owed money, but must tell complainants who are not owed anything, by 18 November 2026 for agreements from 1 April 2014 (where the customer complained by 30 June 2026) and 18 January 2027 for earlier agreements (where the customer complained by 31 August 2026). So a customer may bring you a “no compensation” letter before anyone gets a payment (FCA).

Commission disclosure now

Discretionary commission is banned, but you still have to disclose commission. CONC 4.5.3R requires a credit broker to disclose prominently, in good time before the agreement, the existence and nature of any commission that could affect its impartiality or the customer’s decision. CONC 4.5.3AR adds that you must explain, with equal prominence, how that commission may affect what the customer pays. If a customer asks, CONC 4.5.4R requires you to tell them the amount, or likely amount (FCA Handbook: CONC 4.5).

The Johnson case shows the risk of wording that is technically there but misleading. If your documents say you use a panel of lenders, make sure that is true. If one lender has first refusal, say so. Review your initial disclosure document, your website finance pages and what sales staff say at the desk. Our guide on how to offer car finance as a dealer covers setting this up.

What to say to customers who ask

Be factual, don’t discourage anyone, and point them to their lender. Something like this works:

• “Compensation is paid by the finance company, not by us. The easiest way to find out if you’re owed anything is to complain to your lender directly. It’s free.”
• “Your finance was with [lender]. Here are their contact details.”
• “You don’t need a claims company. The FCA has a template letter on its website.”
• “The FCA has paused compensation payments while a court case is heard. It expects payments to start in 2027 if the scheme is upheld and not appealed.”

Don’t tell a customer whether they will get money or how much. Only the lender can decide. Keep a note of what was asked and what you said.

Timeline

Date	What happened or happens
6 April 2007	Earliest agreement start date covered by the scheme
28 January 2021	FCA ban on discretionary commission arrangements takes effect
1 November 2024	Latest agreement start date covered by the scheme
1 August 2025	Supreme Court judgment in Hopcraft, Johnson and Wrench
31 March 2026	Scheme rules come into force
2 July 2026	FCA confirms the Upper Tribunal has partly suspended the scheme
18 November 2026	Deadline for lenders to tell post-April 2014 complainants who are not owed compensation
14 to 18 December 2026, or 16 to 26 February 2027	Upper Tribunal hearing
18 January 2027	Deadline for lenders to tell pre-April 2014 complainants who are not owed compensation
2027	When the FCA expects payments to begin, if the scheme is upheld and not appealed
31 August 2027	Deadline for customers who were not contacted to complain to their lender

If you are a customer who used car finance

If you had car, van, motorbike or campervan finance between April 2007 and November 2024, start with the FCA’s car finance claims page, which has a list of lenders and a template complaint letter. You complain to your lender, for free, and you don’t need a claims company or law firm.

If you are unhappy with the lender’s decision, you can go to the Financial Ombudsman Service by the deadline in the lender’s letter. The FCA also warns that it will never ask you to transfer money or give your banking PIN or password.

How Haswent helps

Haswent helps you keep today’s finance records in one place, for cars, vans, motorbikes, motorhomes and caravans in one stock system.

In the finance hub you record lender approvals with the amount, APR, term, monthly payment and commission, and admin users see a full history of changes. A credit broker and commission disclosure statement, drafted from your dealership details and FCA number, sits under every step of your online application, and your initial disclosure document opens inside the form. The wording is yours to edit, and you stay responsible for your own disclosures. When a finance deal completes, a VAT-exempt commission invoice to the lender is raised for you, alongside your car sales invoicing. With electronic signatures, signed order forms and invoices are kept as PDFs with an audit trail.

Contact us for a demo.

Sources

• FCA: FCA confirms motor finance redress scheme
• FCA: PS26/3 Motor finance consumer redress scheme and the full policy statement and rules (PDF)
• FCA: motor finance scheme partially suspended (2 July 2026)
• FCA: information for firms on motor finance complaints
• FCA: further information for firms on the Motor Finance Compensation Scheme (August 2026, PDF)
• FCA: car finance claims (consumer guidance)
• FCA: ban on motor finance discretionary commission models
• FCA Handbook: CONC 4.5 commission disclosure
• UK Supreme Court: Hopcraft, Johnson and Wrench press summary ([2025] UKSC 33)

Frequently asked questions