Consumer Scotland responds to FCA consultation on motor finance consumer redress scheme

Consumer Scotland has published its response to the Financial Conduct Authority's consultation on an industry-wide motor finance consumer redress scheme, dated 12 December 2025¹. The body describes itself as the statutory body for consumers in Scotland, established by the Consumer Scotland Act 2020 and accountable to the Scottish Parliament¹.

The response follows an FCA review covering data from 32 million agreements, which Consumer Scotland says found widespread failings in how motor finance firms disclosed commission payments and commercial ties between lenders and brokers¹. Consumer Scotland notes the FCA estimates 14.2 million agreements, 44% of all agreements made since 2007, will be considered unfair¹. It also cites consultation paper figures showing over 2 million people use motor finance each year, with £39 billion borrowed in 2024, and Financial Lives Survey data showing 11% of adults held a motor finance product in 2024¹.

Consumer Scotland says lenders rather than brokers delivering the scheme will mean more timely and comprehensive redress, given there are many more brokers than lenders¹. It supports the FCA's intention to supervise the scheme closely and to monitor firm data with updates published every six months¹. It also welcomes the FCA's work with the Advertising Standards Authority, the Information Commissioner's Office and the Solicitors Regulation Authority to combat misleading information from firms in this space¹.

On compensation levels, Consumer Scotland says it is concerned if the scheme results in significant numbers of consumers receiving less than they should reasonably expect, and recommends the FCA review its approach and put forward an alternative delivering higher levels of consumer compensation¹. It notes the consultation paper acknowledges consumers can choose not to take part and instead go to court, where they may get more or less compensation based on the facts of their case¹. Consumer Scotland adds that using a claims management company or law firm could result in that firm receiving up to 30% of any compensation paid¹. It says communications from lenders and the FCA must make clear the scheme is free to access and that there is no need to use a claims management company¹.

The response recommends that the FCA give lenders guidance for ongoing communications with consumers, monitor a sample of those communications and take follow-up action where guidance is not followed¹. It also recommends a multichannel communications campaign that accounts for the range of consumer circumstances, including vulnerable consumers¹. Consumer Scotland welcomes the FCA's intention to flag that consumers need to contact their lenders proactively if they have not heard from them within 6 months of the scheme start¹.

Why it matters for households

The scheme is intended to compensate people who held motor finance agreements where commission disclosure was inadequate. Consumer Scotland's figures put the potential scale at 14.2 million agreements, 44% of those made since 2007¹. Anyone who has used car finance in that period could be within scope, and the FCA's own estimate is that over 2 million people use motor finance each year¹.

Two practical points stand out. First, the level of compensation is not settled: Consumer Scotland argues the scheme should pay at the same level as consumers might expect through court, and warns that some could otherwise receive less¹. Second, access is free. Consumer Scotland says communications must make clear there is no need to use a claims management company, and notes such firms could take up to 30% of any payout¹. The redress scheme is designed to be simpler than an individual complaint, which Consumer Scotland says means more consumers, particularly vulnerable ones, receive compensation they are owed¹.

What happens next

The FCA has not yet confirmed final scheme rules. Consumer Scotland's response is one submission to the consultation¹. It notes the FCA's intention to publish updates every six months once the scheme is running, and its plan for a communications campaign telling consumers to contact lenders if they have not heard within 6 months of the scheme start¹. The FCA's final decisions on compensation levels and scheme design have not been reported.