The Financial Conduct Authority has streamline the motor finance redress scheme, so millions get compensation in 2026.
It said the motor finance compensation scheme will now include an implementation period for finance firms.
It is currently considering over 1,000 responses to its proposals for a compensation scheme for motor finance customers who were treated unfairly. It expects to publish final rules in late March.
“Final decisions on the scheme have not yet been made. But to help firms prepare and ensure consumers get any money owed promptly, we’re setting out some details now on how we intend to streamline the consumer journey and make it smoother for firms to operate.
“Given the scale and complexity of the scheme and in response to feedback, we’re likely to introduce an implementation period of three months, with up to five months for older agreements. Firms could choose to process claims under the scheme sooner. We would also streamline the process for consumers and firms.
“People who complain before the scheme starts would no longer be asked if they wish to opt out.
“Instead, within three months of the end of the implementation period, their lender would tell them whether they’re owed compensation, and how much.
“Consumers receiving a redress offer would be able to accept it immediately, rather than waiting for a final determination,” it said.
“Firms would not be required to write to customers via recorded delivery. We would allow a range of channels that best meet consumers’ needs with appropriate safeguards to prevent fraud.
“Even with an implementation period, streamlining the process means millions of people would receive compensation in 2026.”
The FCA said it had “cracked down” on poor practice by FCA-regulated claims management companies, with over 800 misleading adverts removed or amended since January 2024.
The Finance & Leasing Association welcomed the changes. Shanika Amarasekara, CEO of the Finance & Leasing Association, said: “As the FCA has pointed out, their note will help firms prepare, should the scheme go ahead.
“However, it also shows a much more proportionate approach to how the scheme could operate in practise. We are pleased that they listened to feedback.
“We hope to see the same proportionate approach applied to the remaining proposals so that the overall scheme, if it goes ahead, would only compensate those customers who actually lost out.”
