LONDON, March 26, 2026, 21:50 GMT
- The Financial Conduct Authority will set out its approach to motor finance redress after markets close on March 30. 1
- The proposed scheme could cover about 14.2 million agreements written between 2007 and 2024, with average payouts around 700 pounds per agreement and total costs to firms put at about 11 billion pounds. 2
- The Financial Times and Reuters have reported that banks and claims management companies are weighing challenges as lenders including Lloyds, Santander UK and Close Brothers build provisions. 3
Britain’s Financial Conduct Authority will set out its approach to motor finance redress on Monday, putting an 11 billion-pound compensation plan at the center of a widening dispute with banks and claims firms. The announcement will shape how millions of motorists are repaid for hidden or poorly disclosed commissions on car loans and whether payments can begin in 2026. 1
The timing matters because the regulator is trying to close out one of Britain’s costliest mis-selling cases without driving consumers into years of complaints, ombudsman referrals and court claims. Earlier this month, the FCA said it was leaning toward an implementation period of three months, rising to five months for older agreements, while still aiming to get millions compensated in 2026; when the consultation opened in October, chief executive Nikhil Rathi said “many motor finance lenders did not comply with the law or the rules” and that customers should now get “fair compensation.” 4
Rathi told lawmakers on March 24 that the FCA would publish its approach shortly after markets close on Monday. The watchdog later confirmed the timing on its website, after consulting last October on an industry-wide scheme for borrowers it says were treated unfairly. 1
The plan covers regulated motor finance agreements written between April 6, 2007 and Nov. 1, 2024 where commission was paid by the lender to the broker. The FCA says about 14.2 million agreements could be classed as unfair, including discretionary commission arrangements — a model that let dealers raise a customer’s interest rate to earn more commission — as well as some high-commission and tied arrangements. 2
On the FCA’s October estimates, lenders would pay about 8.2 billion pounds in compensation, with consumers receiving around 700 pounds per agreement on average. An FCA analyst briefing put the total bill to firms, including implementation costs, at about 11 billion pounds, though the regulator has also said the majority of motor finance agreements will not qualify and many consumers would get more or less than the average. 5
Resistance has sharpened as the deadline nears. The Financial Times reported that UK banks and claims management companies are preparing legal challenges to the scheme, while Reuters has reported that lenders object to what they see as a broad definition of an unfair loan and a relatively low bar for “excessive” commission. 3
The lenders with the most at stake have already started to absorb the cost. Lloyds has put aside almost 2 billion pounds, Santander UK has raised its motor finance provision to 461 million pounds, and Close Brothers said this month that its total provision stood at about 300 million pounds after a further 135 million-pound charge. 1
Close Brothers has become the clearest stress point in the sector. Chief executive Mike Morgan told Reuters he “strongly, strongly” disagreed with a Viceroy Research report that questioned the bank’s provisioning, while RBC Capital Markets analyst Benjamin Toms called the short seller’s work “sensationalist”. Morgan also said the lender needed more clarity on the redress scheme before it could restore its dividend. 6
The FCA is also trying to keep claims companies from taking a large slice of any awards. It has urged borrowers to complain directly, saying there is no need to use a claims manager or law firm and warning that those who do could lose more than 30% of any compensation, just as the FT reported that claims specialists were preparing to contest the scheme. 4
What could still change is the balance between speed, cost and legal risk. The FCA said on March 4 that final decisions had not yet been made and that it was reviewing more than 1,000 responses; consumers will also be able to opt out of the FCA route and sue instead, though the regulator says court outcomes are uncertain and may leave people with less after fees. 4
