Motor finance redress: Where now and what next?

The Supreme Court’s ruling this August marked a turning point, confirming dealers owe no fiduciary duty to customers, easing fears of an even wider fallout on broker-sold products and worst-case £44bn redress scenario. But it also confirmed that undisclosed high commissions and contractual ties can still create an unfair relationship between a broker, lender, and consumer.

It’s a wake-up call for banks to scrutinise all large, undisclosed commissions.

In early 2026, the FCA will publish its final rules for an industry-wide compensation scheme, covering agreements dating back to 2007. It has already extended the consultation response window to 12 December, after pushback on the original six-week deadline.

Make your feelings known

The regulator says it is willing to adjust and refine the scheme if presented with ‘convincing, evidence-based feedback’ from the industry. That means the window for influence is still open – but closing fast.

Once the scheme is final, the message from the FCA is clear: implementation must be swift.

That means banks cannot afford to sit back and wait.

The scale and complexity will rival previous mass remediation exercises, making early action critical.

There are several areas that firms should zero in on now. First, data is paramount. Banks need to pinpoint all their commissions agreements back to 2007 and confirm specific arrangements that were in place. Data gaps, fragmented systems, and the challenge of tracing broker contracts and customers will make automation difficult. But the sooner firms get started, the less painful it will be.

Centralising customer and broker records will help cut delays. Incomplete datasets are inevitable, but careful, evidence-based assumptions can be applied to move forward. Lenders will also have to factor in the FCA’s presumptions and rebuttal options. Put simply, the regulator will assume certain commission models and arrangements caused harm unless firms have strong evidence to prove otherwise.

Gathering this evidence from brokers and internal records will be challenging. Ultimately, if banks have too much missing data or limited proof of customer outcomes, they will struggle to rebut large volumes of arrangements and be on the hook for a larger payout.

Cash call

Redress will also have to be calculated using the FCA’s standardised remedies and include interest.

Reconstructing payment schedules, factoring in early settlements, and automating calculations calls for complex design work, so banks should resource smartly. Think about how you can secure skilled case handlers early and explore automation for calculations and workflow. Getting this right from the outset is critical to avoid costly rework.

Equally important is planning for customer experience.

Tens of thousands of consumers will need to be proactively contacted next year. Banks must manage high volumes efficiently while preventing fraud and ensuring communications are accurate, timely, and tailored – particularly for vulnerable customers.

Finally, robust oversight is non-negotiable. Don’t underestimate the task of building strong governance and quality controls from day one.

Banks should appoint accountable senior managers, prioritise financial resilience, and apply tight controls over redress programmes. Regular reporting to accountable senior managers and the regulator will be essential to maintain trust and compliance.

Delivering redress at scale is no small feat. Lenders face the daunting task of tracing historic customers, retrieving broker records, and protecting against fraud. Smaller firms fear resource constraints and the looming threat of enforcement if they fall behind.

All this requires considerable data, resources, automation, and engagement with brokers, customers, and professional representatives. The scale and tight timescales won’t make it easy.

The FCA has also just accelerated its timeline: firms will need to begin handling motor finance complaints again from 31 May, two months earlier than planned, following a two-year hiatus.

While the estimated cost of redress is lower than initial eye-watering predictions, firms are continuing to bolster their provisions and warn of ripple effects on credit availability, car sales, and economic growth.

The FCA’s independent impact assessment echoes these considerations, noting that while the Supreme Court ruling restored a degree of confidence, details on the final methodology for redress would be important to restore understanding and confidence in the market.

Fairness will be a flashpoint in 2026. Banks argue that the FCA’s hybrid approach risks overcompensating consumers compared to actual loss, while consumer advocates insist remedies must reflect the Supreme Court’s stance on fairness – not just financial harm.

Legal certainty has arrived, and regulatory clarity is on the horizon. The challenge is real – but inaction is simply not an option. Banks must prepare today to deliver timely, fair redress and good outcomes for customers in 2026.

This article was first published in The Banker.