📢 FCA motor finance redress scheme final rules are out (PS26/3): another turn in the road

After months of anticipation, we finally have some clarity. It’s clear the FCA has listened closely to industry feedback, and the final outcome lands with a mix of expected direction, and some genuinely meaty, and in places surprising, changes.

There’s a lot to get through, and firms will need to get up to speed quickly and pivot at pace. Here’s our hot take on just some of the key changes, drawn directly from the FCA’s published amendments, a view on some of the drivers and resulting implementation risks that firms may face:

✅ Key Changes in PS26/3

🔄 Two-scheme structure introduced:

In an attempt to protect momentum and improve deliverability, the FCA has split the scheme into two.

• Scheme 1: Loans originated between 6 April 2007 – 31 March 2014

• Scheme 2: Loans originated between 1 April 2014 – 1 November 2024

💰High-value loans excluded - Loan values higher than 99.5% of other loans that year are now out of scope of the scheme (these customers can still go to FOS).

📈  High commission threshold increased - Now set at ≥39% of total cost of credit (+10% of the loan). This is likely to be well received by many firms when identifying their final populations, which will be narrowed.

🚫 Exemptions - The FCA has carved out certain arrangements as “fair”, meaning no redress for arrangements where:

• There was an easily recognisable tied arrangements (including captive)

• Low-value commissions deemed unlikely to have influenced broker behaviour (£120 pre-2014 / £150 post-2014)

• Zero APR deals

🧾Flexibility on rebuttals - Firms have greater ability to challenge the presumption of unfairness, but this will rely heavily on evidence.

📬 Communications - Customer communications have been made more targeted and flexible, with firms only required to contact customers who have complained or are due redress, removing the “opt-in” proposal, there’s also no more mandatory recorded delivery.

⏱️Timelines & Implementation Window – The introduction of an implementation windows for both schemes, giving firms the chance to digest and becoming operationally ready, despite this, delivery expectations are still challenging, with all customers expecting redress payments by the end of 2027. It’s important to note that firms must still submit delivery plans to the FCA within six weeks of publication of the final rules

Why these changes?

The final rules reflect a clear attempt to strike a difficult balance: delivering meaningful consumer redress while ensuring the scheme is operationally deliverable and proportionate for firms of all sizes. There is also a visible focus on maintaining the long-term competitiveness of the motor finance market and supporting the broader economic growth agenda.

Splitting the scheme into two appears to be a clear attempt to future-proof it against potential legal challenge while keeping it workable in practice. It reflects the reality that pre- and post-2014 cases differ materially in terms of regulatory perimeter risk, data quality and retention, and underlying market practices. In effect, it allows both the FCA and firms to progress more recent, better-evidenced cases more quickly, without the entire scheme being slowed down by the complexity and uncertainty associated with older historic agreements.

At the same time, there is a clear effort to contain overall remediation costs and avoid disproportionate impacts on specific business models or customer cohorts. In doing so, the FCA seems to have recognised that firms have very different customer profiles, data maturity, and operating models, and that a “one size fits all” approach risked creating unworkable operational burden and potential financial strain for parts of the market under the original consultation proposals.

What are the risks for Firms?

Overall, while the final rules bring some very welcome changes, firms need to carefully interpret these and operationalise correctly in a short timeframe.

The key challenge is no longer just understanding eligibility, but evidencing historic arrangements, recalibrating assumptions and population sizings made under the original consultation.

Splitting the scheme introduces new risks for firms around operational complexity, consistency and execution. Managing two parallel regimes increases the likelihood of classification errors, inconsistent outcomes, and reporting burden, particularly where data is incomplete or cases sit close to scheme boundaries.

Coming soon: Our Motor Finance Redress Scheme Gap Analysis Tool

To help firms respond quickly and confidently, we’re developing a Gap Analysis framework designed to bridge the transition from the consultation assumptions to the final PS26/3 rules. It enables firms to rapidly identify where positions have changed, where original interpretations may no longer hold.

With implementation timelines potentially as short as 3–5 months, early clarity is critical. This is designed to do the heavy lifting, helping firms quickly understand what’s changed, what it means, and what needs to happen next.

Get in touch with us to hear about this further and speak to our best in industry team of compliance and redress experts.