TL;DR: The FCA issued a public update on 8 May 2026 on the status of legal challenges to its motor finance compensation scheme. The scheme, designed to address consumer detriment from undisclosed commission arrangements in motor finance agreements, sits at the centre of post-Supreme Court redress activity. Affected consumers can still complain directly to lenders. The FCA confirmed the redress scheme remains under development and that the legal challenges do not pause individual consumer complaints. Anyone with a motor finance agreement taken out between 2007 and 2024 may want to check whether their case is in scope.
Last reviewed: 12 May 2026
The Financial Conduct Authority (FCA) issued a public statement on 8 May 2026 updating consumers and firms on the legal challenges to its motor finance compensation scheme. The statement, published on the FCA's news pages, sits within a broader process that has been running since the Supreme Court's August 2025 ruling in Hopcraft, Wrench and Johnson v Close Brothers and FirstRand, the case that defined the boundaries of broker-customer fiduciary duty in motor finance.
The legal position established by the Supreme Court, together with the FCA's earlier interventions through Policy Statement PS26/3, has triggered one of the largest UK consumer redress exercises in recent years. The FCA's 8 May update confirms that work on the redress scheme continues, that the legal challenges relate to specific procedural and scope questions, and that individual consumer complaints to lenders are not paused.
What the motor finance redress is about
Between 2007 and 28 January 2021, many UK motor finance agreements included broker commission arrangements where the broker (typically the car dealer's finance team) had discretion to increase the interest rate paid by the customer, with the broker earning a higher commission as a result. These discretionary commission arrangements were banned by the FCA from 28 January 2021. The Supreme Court's August 2025 ruling clarified the legal basis on which affected customers could seek redress.
The FCA's scheme covers a defined population of motor finance agreements where the commission structure was not adequately disclosed and where the customer can demonstrate the resulting detriment. The exact scope, evidentiary standard and redress calculation methodology are still being finalised, which is what the legal challenges relate to.
What the 8 May statement adds
The FCA's 8 May 2026 statement, published on fca.org.uk/news, makes three points relevant to consumers.
First, the legal challenges underway do not pause the underlying right of consumers to complain to their motor finance lender about commission arrangements. Lenders are required to handle complaints under the standard DISP rules in the FCA Handbook, with the eight-week response window applying as normal.
Second, the FCA continues to work with firms on implementation. Larger lenders have already begun proactive reviews of affected portfolios. Smaller lenders and brokers should be auditing their files now in preparation for the formal scheme launch.
Third, the FCA reminds consumers that they do not need to use a claims management company (CMC) to make a complaint. Direct complaint to the lender is free. The Financial Ombudsman Service is the free escalation route if the lender's response is not satisfactory.
Which agreements are in scope
The redress scope covers regulated motor finance agreements (typically Hire Purchase or Personal Contract Purchase deals) entered between roughly April 2007 and 28 January 2021, where a discretionary commission arrangement was in place and where the customer can establish loss.
Agreements entered after 28 January 2021 are out of scope because the discretionary commission ban took effect from that date. Cash purchases, business contract hire, and certain other non-regulated arrangements are also out of scope.
The Supreme Court's ruling extended the legal basis for redress in important ways, including clarifying when the broker was acting as the customer's fiduciary. The FCA's scheme operationalises this for the regulated motor finance population.
What consumers should do now
Four practical steps apply.
First, identify whether you had a regulated motor finance agreement (HP or PCP) between 2007 and January 2021. Cash sales and unregulated agreements are not in scope.
Second, gather what you can of your original finance documentation. The lender retains copies but having your own records accelerates the complaint process. Look for the original credit agreement, the dealer's commission disclosure (if any), and any communication about the interest rate.
Third, complain directly to the lender. The lender is required to acknowledge promptly and respond substantively within eight weeks under DISP rules. The complaint should explain why you believe the commission arrangement was not adequately disclosed and what loss resulted.
Fourth, if the lender's response is unsatisfactory, escalate to the Financial Ombudsman Service free of charge. The FOS time limit is six years from the act complained of or three years from when you should reasonably have known of cause to complain, subject to the FCA's ongoing extension of time limits for motor finance complaints under DISP.
What firms should do now
Lenders and brokers should be running file reviews against the FCA's PS26/3 framework and the Supreme Court's reasoning. Three operational priorities apply.
First, complaint handling capacity. Volumes are likely to increase as the formal scheme launches. Firms should have provisioned for elevated complaint volumes and FOS escalations.
Second, redress provisioning. The FCA's January 2026 Enforcement Watch newsletter signalled the regulator's expectation that firms identify and address harm proactively. Firms that wait for the formal scheme to compel action are more likely to face supervisory intervention.
Third, consumer communications. Firms should be transparent with affected customers about the position, the timeline, and the route to complaint. CMC engagement should not be the customer's main pathway given the free direct route is available.
Frequently Asked Questions
What is the FCA motor finance compensation scheme?
The scheme is the FCA's framework for redressing consumer detriment from discretionary commission arrangements in motor finance agreements between roughly 2007 and 28 January 2021. It builds on the Supreme Court's August 2025 ruling and was set out in FCA Policy Statement PS26/3.
How do I know if my car finance agreement is in scope?
The scheme covers regulated Hire Purchase and PCP agreements between 2007 and 28 January 2021. Agreements after that date, cash sales, and unregulated business arrangements are out of scope. Check your original finance documents.
Do I need a claims management company to complain?
No. Complaining directly to the lender is free, as is escalation to the Financial Ombudsman Service. The FCA repeated this in its 8 May 2026 statement. CMCs charge a fee, typically a percentage of the redress recovered.
How long does a motor finance complaint take?
Lenders must respond substantively within eight weeks under FCA DISP rules. If the response is unsatisfactory, the Financial Ombudsman Service handles escalations free of charge. FOS timelines vary but typically run several months.
What is the redress likely to be worth?
This depends on the agreement terms, the commission arrangement and the customer's loss. The FCA is finalising the methodology. Redress for individual cases will typically reflect the additional interest paid because of the undisclosed commission arrangement.
Sources
- FCA statement on motor finance scheme legal challenges (8 May 2026): fca.org.uk/news
- FCA Policy Statement PS26/3: fca.org.uk/publications
- Supreme Court ruling Hopcraft v Close Brothers and others [2025] UKSC 33: supremecourt.uk
- Financial Ombudsman Service motor finance pages: financial-ombudsman.org.uk
- FCA Handbook DISP (complaints): handbook.fca.org.uk/handbook/DISP
