Jon Butler, Vehicle Remarketing Association legal counsel and partner at Geldards:
“There are some aspects here that lenders and dealers can be pleased about – notably, the volume of claims is lower than previously indicated and the overall cost has been reduced by a reasonable amount. Also, some sensible measures have been introduced such as a de minimis limit on claims and the removal of zero interest agreements from the scheme.
“However, there remain issues. At a fundamental level, whether customers have been treated fairly or unfairly remains an open legal question. Also, dealers continue to face a significant data and evidence burden and, while this is outside the FCA’s remit, remain exposed to attempts by lenders to share some of the forthcoming financial burden.
“The question facing the motor finance sector both as individual companies and a whole is whether to deem this a reasonable compromise and comply with the scheme, believing it best to put the whole episode behind them, or to mount a legal challenge? It seems not unlikely that the latter route will be followed by at least some which, working by the timetable outlined by the FCA, means that at least some payments could be delayed until 2028.”
Jon has provided this summary table of the FCA’s decisions for VRA members.
| Item | Theme | Consultation Proposal (October 2025) | Final Scheme (March 2026) | Impact |
| 1 | Overall Scheme Scope | ~14.2m agreements potentially in scope | 12.1m agreements confirmed in scope | ~15% reduction driven by refined definitions, de minimis thresholds, and exclusions |
| 2 | Definition of “Material Commission Arrangements” | Broad: DCAs, high commissions, exclusivity | Must be undisclosed and material. High commission = ≥39% of total cost of credit AND ≥10% of loan amount | Focuses on genuinely distortionatary structures; removes marginal cases. |
| 3 | De Minimis Thresholds | None | Pre‑2014: > £120 commission. Post‑2014: > £150 commission | Excludes trivial cases; reduces administrative load and redress exposure |
| 4 | Johnson‑Type Cases (Full Redress) | Not fully defined | ~90,000 cases receive full commission + interest. Criteria: undisclosed contractual tie and/or DCA AND very high commission ≥50% of total cost of credit and ≥22.5% of loan | Clear, narrow definition ensures only the most unfair cases receive full refunds |
| 5 | Hybrid Remedy (All Other Cases) | Proposed average of estimated loss and commission paid. | Consumers receive average of estimated loss and commission paid, plus interest. Estimated loss based on APR differences between DCA and flat‑fee loans | Provides a consistent, evidence‑based remedy for the majority of cases |
| 6 | APR Adjustment – Post‑2014 | Not finalised | 17% APR adjustment applied to agreements from 1 April 2014. Based on enhanced analysis using 2017–2021 data | Reflects improved dataset; aligns remedy with actual detriment |
| 7 | APR Adjustment – Pre‑2014 | Not finalised; data concerns noted | 21% APR adjustment. Mid‑point between 17% and 26%. Higher due to more harmful DCA practices and larger APR gaps in earlier years | Increases average redress for pre‑2014 cases by £31; compensates for limited data availability |
| 8 | Redress Caps | Not proposed | Caps applied in ~1/3 of cases to prevent over‑compensation | Major cost‑containment measure; ensures proportionality |
| 9 | Exclusion: Lowest 5% APR (Non‑0% Deals) | Not specified | Agreements where APR was in the lowest 5% of the market (excluding 0% APR) receive no compensation. ~64,000 agreements excluded | Recognises that these consumers probably already received unusually favourable pricing |
| 10 | Interest on Compensation | Not finalised | Simple interest at BoE base rate +1%, with a minimum of 3% per year. Consumers cannot challenge the rate | Provides certainty; protects consumers in low‑rate years; prevents disputes |
| 11 | Average Compensation per Agreement | Early modelling suggested £775 | ~£829 per agreement (assuming 75% claim rate) | Reflects narrowed scope, caps, and refined hybrid methodology |
| 12 | Treatment of Exclusivity Arrangements | All exclusivity potentially in scope | Excludes exclusivity where visible manufacturer–dealer links existed (e.g., OEM captive finance) | Major relief for franchised networks; reduces exposure for OEM‑aligned dealers |
| 13 | 0% APR Agreements | Potentially in scope | Explicitly excluded | Removes a large low‑risk cohort |
| 14 | Low‑Commission Agreements | Potentially in scope unless fairness proven | Excluded unless lender cannot evidence fairness | Further narrows scope; reduces case volumes |
| 15 | Consumer Contact Requirements | Firms expected to contact all potentially affected customers | Firms only contact complainants and customers owed redress. Recorded delivery not necessary | Major operational simplification; avoids mass and expensive mailing |
| 16 | Complaint Handling Rules | Pause during scheme design | Complaints resume under scheme rules; lenders must issue decisions within 3 months of identifying redress | Reduces backlog risk; clarifies process |
| 17 | Delivery Timelines | Indicative only | Hard deadlines: 30 June 2026 (post‑2014) and 31 Aug 2026 (pre‑2014) | Two schemes in case a legal challenge delays the earlier claims |
| 18 | Estimated Industry Cost | ~£11bn total; £8.2bn redress. | £9.1bn total; £7.5bn redress; £1.6bn costs | Reflects narrowed scope, caps, and operational efficiencies. |
| 19 | Supervision & Enforcement | High‑level oversight | FCA to run dedicated supervisory team, require SMF attestations, and coordinate with SRA/ASA/ICO to police CMC/legal firm behaviour | Stronger governance expectations; increased scrutiny |
| 20 | Dealer/Broker Implications | Dealers not directly liable but may face indirect consequences | Same regulatory position; lenders expected to review historic dealer practices, commission models, and indemnities | Dealer risk remains commercial/contractual, not regulatory — but still material. |
| 21 | Data & Evidence Requirements | Firms expected to reconstruct historic data | FCA allows reasonable assumptions where data missing; lenders must evidence fairness for exclusions | Reduces burden but still requires robust audit trails |