In advance of the upcoming Supreme Court hearing starting on 1 April 2025 to determine the liability of motor finance lenders paying discretionary commission to car dealers, the FCA has announced its intentions regarding a possible customer redress scheme. 

The FCA has set out its plans to consult on a redress scheme should the Court of Appeal decision in Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd be upheld. 

The FCA wants to give as much certainty as possible and has said that “if taking into account the Supreme Court's decision, we conclude motor finance customers have lost out from widespread failings by firms, then it's likely we will consult on an industry-wide redress scheme.”

If a redress scheme is implemented, firms will need to proactively determine whether customers have lost out due to their failings and offer appropriate compensation in accordance with FCA requirements as to the redress process. This would mean affected customers will not have to bring a claim to the Financial Ombudsman and would also not be subject to the same limitation periods. 

The FCA has said that a redress scheme would be simpler for consumers than bringing a complaint and there would be less reliance on claims management companies, meaning that consumers would keep all of any compensation they receive. The FCA’s view is that this would also be more orderly and efficient for firms than a complaints led approach. If a redress scheme were to be implemented it is unclear how far back firms would be expected to remediate. In particular, it may complicate remediation measures if this period is a long one, given that records are likely to only go back five to seven years.   

Currently complaints in respect of discretionary commission models are subject to the FCA’s temporary complaints handling rules and complainants and firms have longer to initiate and respond to relevant complaints. In the latest publicised quarterly data (as of 4 March 2025), the Financial Ombudsman has disclosed that the most complained about product for the quarter was motor hire purchase due to complaints about motor finance commission arrangements. 

On timings, the FCA has stated it will confirm within six weeks of the Supreme Court's decision if it plans to implement a redress scheme. It is currently expected that a Supreme Court decision will be made early Summer. 

Please see our previous article Court of Appeal hands down decision in motor finance test case for further details regarding the case.