The FCA’s proposed motor finance redress scheme has landed, and with it, a hefty price tag. The regulator estimates £8.2 billion in compensation for customers, plus an additional £2.8 billion in implementation costs, bringing the total industry bill to around £11 billion.
The Finance & Leasing Association (FLA) isn’t convinced. Chief executive Shanika Amarasekara said the figures “remain too high” with the FLA’s Adrian Dally also calling for transparency on how the FCA arrived at them. The consultation document hints at modelling based on participation rates and assumed losses, but firms are already questioning whether those assumptions hold up across a diverse market, particularly for non-prime and smaller lenders.
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Who pays and how?
Beyond the numbers, implementation looms as the tougher test. The FCA wants lenders (not brokers) to administer redress, aiming for consistency and to prevent further complaints reaching the FoS or the courts. But that places the operational burden squarely on lenders’ shoulders.
Firms will need to identify eligible customers, determine whether unfairness occurred, and calculate payouts, often by reconstructing data going back to 2007. For some, that will mean trawling through legacy systems and incomplete records to assess exposure and prove what level of disclosure actually occurred.
For smaller players, the task could be overwhelming. Even the FCA acknowledges that data gaps, system limitations and resource constraints will challenge firms’ ability to deliver timely, accurate outcomes. Automation could help, but only if the underlying data is clean.
Balancing fairness and feasibility
The FCA says its scheme strikes a balance between fair compensation and market stability. But firms will be watching closely to see whether the costs and operational demands are truly proportionate, and whether the regulator’s confidence that the market will “remain orderly” proves justified.
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By GlobalDataThe consultation runs until 18 November 2025, with final rules expected early 2026. For now, the industry’s focus is clear: how realistic are the FCA’s numbers and how workable is its plan?
