Regulator delays deadline as banks question methodology and impact
The Financial Conduct Authority (FCA) has postponed the deadline for feedback on its proposed compensation scheme for consumers mis-sold car finance, following requests from both consumer groups and lenders for additional time to review market data.
The consultation period will now close on Dec. 12, instead of the original Nov. 18 date. The regulator expects to finalise its rules in February or March 2026.
We’re extending the car finance compensation consultation deadline until 12 December. It’s important we receive as much evidence as possible.
— Financial Conduct Authority (@TheFCA) November 5, 2025
We’ve moved at pace since the Supreme Court judgment and still expect to publish final rules in early 2026.https://t.co/Ee1MkhApFH pic.twitter.com/ht0mDSjcqn
The FCA estimates that the mis-selling of motor finance could result in compensation costs of approximately £11 billion for lenders, making it one of the most significant financial redress schemes in the sector’s history. The scheme is intended to address around 14.2 million motor loan agreements made between 2007 and 2024, where commission arrangements and contractual relationships between lenders and car dealerships were not properly disclosed.
Industry feedback has raised questions about the FCA’s approach to calculating redress, the timeframe covered by the scheme, the rate of compensatory interest, and the mechanisms for ensuring independent oversight. Concerns have also been expressed regarding the ability of smaller firms to manage the costs and the need for measures to prevent fraud.
Several major lenders have already made provisions for potential compensation. Lloyds Banking Group has set aside nearly £2 billion, while Santander has allocated £295 million, though it has not updated its estimate since cancelling the publication of its full UK results last month. Other institutions, including Close Brothers and Barclays, have also increased their provisions in response to the FCA’s proposals.
Meanwhile, Charlie Nunn (pictured right), group chief executive at Lloyds Banking Group, addressed the House of Lords Financial Services Regulation Committee, highlighting the broader implications of the scheme.
“Having a scheme like this, that can take away more than 20 years of profitability from the sector, is a really difficult issue for both global companies looking to invest in the UK – and for that matter my investors looking to invest in financial services,” Nunn said. “My concern laid with overall investability and sentiment around the UK – broadly based and then with financial services.”
The FCA’s consultation extension follows criticism from banking groups, who have described the scheme as “disproportionate.” At the same time, the All-Party Parliamentary Group on Fair Banking has accused the regulator of favouring lenders, citing a £4.4 billion gap in the proposed redress package.
In response, the FCA stated: “It’s important we receive as much evidence as possible on specific concerns through the consultation as well as alternative suggestions if respondents don’t agree with our proposals. We’ll consider all the evidence and ideas received before taking final decisions.”
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
