In a landmark judgment that has since sent ripples across the UK motor finance industry, the Court of Appeal introduced stricter standards for commission disclosure, raising significant implications for lenders, brokers, and consumers alike. In this article, we summarise what we know so far and any key developments in this ongoing story throughout 2025.
Background
Earlier in 2024, the Financial Conduct Authority (FCA) launched an investigation into potential overcharging of car finance customers under Discretionary Commission Agreements (DCAs). The investigation highlighted claims from three consumers who argued that car dealers, acting as brokers, failed to adequately disclose commission payments; undermining the impartiality of the financial advice provided and potentially leading to unfair outcomes for customers.
While the initial investigations focused on DCAs, which were banned in 2021, the Court of Appeal decision significantly broadened the scope to encompass any car finance commissions. The Court of Appeal’s hearing in these matters, delivered against the context of the FCA’s ongoing review, as mentioned above, underscores the complexity and significance of these matters for the industry.
1 May 2026: FCA compensation scheme legal challenge
The FCA has recently faced push back on the redress scheme in two directions:
- Consumer groups have said the FCA's scheme is too narrow and would underpay many drivers
- While, a number of lenders have challenged the scheme for being too broad and too costly
FCA response
The FCA have responded stating that the goal remains to get consumers fair compensation as quickly as possible while preserving a healthy motor finance market. It has said it will robustly defend the scheme in court, describing it as the best way to resolve a widespread and long-running issue, and warned that challenges create uncertainty and may delay payouts.
The FCA has reiterated to consumers to complain directly to their lender rather than using claim firms (CMCs), because the direct route is free and CMCs are likely to take a significant cut of any compensation.
30 March 2026 Update: FCA consumer redress scheme
FCA redress scheme
On 30 March 2026, after markets closed, the FCA announced the details of their proposed consumer redress scheme.
The announcement provides much needed clarity on the full extent of support available to consumers, and therefore, the requirements of firms in their responses to claims.
Scope
The scope of the scheme covers motor finance agreements taken out between 6 April 2007 and 1 November 2024 where commissions was payable by the lender to the broker.
The dates covered was question during consultations, therefore the FCA is implementing two schemes:
- Covering 6 April 2007 – 31 March 2014
- Covering 1 April 2014 – 1 November 2024
How it will operate
There is a short implementation period for each so that firms can prepare, these will be up to:
- 30 June 2026 for loans taken out from 1 April 2014
- 31 August 2026 for those agreed earlier.
Lenders will have 3 months from the end of the implementation period to let consumers know whether they’re owed compensation and the amount.
There is a requirement for firms to contact consumers who haven’t complained, but only in the instance where they are potentially owed money or those who are timed out of the scheme.
The FCA has set out the stages of the process and the required timelines for firms for both consumers who complain before the implementation period ends or during the scheme, and consumers who don’t complain (but who are eligible), which can be found in their PS26-3 policy statement.
Calculations
The FCA has reported that ~90,000 consumers who cases align with the Johnson case will receive redress of all commission plus interest.
They define these cases as involving an “undisclosed contractual tie and/or DCA and very high commission of at least 50% of the total cost of credit and 2.5% of the loan”.
In all other cases, consumers should expect to receive the “average of estimated loss and the commission paid, plus interest”.
There are also interesting distinctions in APR adjustments in calculations based on the date of the agreement being claimed against:
- Post‑2014 agreements – will use an APR adjustment of 17%, based on more recent data (2017–2021) showing the average difference between DCA and non‑DCA loans. This reflects improved market practices and more moderate levels of harm.
- Pre‑2014 agreements: Use a higher APR adjustment of 21% to reflect that earlier loans generally involved more harmful forms of DCA and larger APR differences, causing greater financial loss.
Additional notes
The final design of the free to use scheme is the result of a lengthy and detailed consultation process with relevant industry stakeholders, certain aspects of the scheme have been adjusted, including:
- Eligibility
- Compensation calculations, and
- Timelines
Read full details on these adjustments in the FCA's press release.
As a result of these adjustments:
- 12.1m agreements are now eligible for compensation, down from 14.2m at consultations,
- Firms are expected to pay out ~£7.5bn in redress, down from £8.2bn, and
- The estimated total bill to firms is down from £11bn to £9.1bn.
The FCA's hope is that the introduction of the scheme will put an end to uncertainty and reduce the overall impact on access to motor finance and prices for consumers going forward. It is anticipated that the market will remain resilient and we will see continued healthy competition between lenders.
[This article was updated 31 March, 2026]
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