Regulator to confirm next steps within six weeks of Supreme Court ruling on commission disclosure cases
The Financial Conduct Authority (FCA) is outlining the potential framework for a motor finance consumer redress scheme, pending the outcome of a Supreme Court judgment expected next month.
The scheme would address past commission arrangements between motor finance lenders and brokers prior to a regulatory ban in 2021.
The regulator has been examining the use of discretionary commission arrangements (DCAs), which allowed car dealers to set interest rates on finance deals, often increasing broker commissions. Although banned in January 2021, numerous consumer complaints followed, primarily focused on undisclosed commission terms.
Two key 2024 rulings by the Financial Ombudsman Service found in favour of consumers, prompting the FCA to launch a formal investigation in January of the same year. The Court of Appeal later ruled that failing to disclose commission structures was unlawful, broadening the scope of the FCA's review.
The Supreme Court heard an appeal in April 2025 on the Court of Appeal’s ruling. The FCA participated by submitting its views. A decision is expected by July. Within six weeks of that judgment, the FCA plans to confirm whether it will proceed with a formal proposal for a redress scheme.
Should the judgment favour consumers, the FCA would likely move quickly to issue a consultation. The proposed scheme would include detailed draft rules, a cost-benefit analysis, and clear timelines. Subject to consultation, implementation could occur in 2026.
The scheme, if introduced, would guide how firms assess and calculate redress. “We would aim to make any scheme easy for consumers to understand and participate in, without needing to use a claims management company (CMC) or law firm,” the FCA stated.
Two structures are under consideration: opt-in and opt-out. An opt-in model would require consumers to confirm participation, which may create confusion about which firms they dealt with. An opt-out structure would automatically include eligible consumers unless they decline, potentially increasing firm costs and administrative burden.
The FCA noted that estimates of redress vary, and some projections from claims firms appear inflated. Any approach to compensation would be shaped by regulatory objectives and evidence, including the Supreme Court’s decision.
Any scheme must protect both consumers and the broader market. The FCA cautioned that widespread firm failure could limit competition and access to credit, as motor finance is not covered by the Financial Services Compensation Scheme.
The FCA continues consulting with industry stakeholders, consumer groups, and trade associations. Depending on the level of pre-consultation engagement, the consultation period may be shortened to as little as six weeks. In parallel, the FCA is reviewing existing motor finance rules in its Handbook and may propose further updates shortly after the Supreme Court ruling.
The regulator has committed to clarity and speed following the court’s decision. If a redress scheme is proposed, the FCA will provide full details on structure, implementation, and timelines. Firms and consumers are advised to await further guidance to avoid premature actions that could lead to unnecessary costs.
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