Motor finance compensation: Legal comment

The Financial Conduct Authority has announced that millions of motor finance customers will receive compensation this year under a scheme for those treated unfairly by firms who broke the law by failing to disclose important information.

Commenting on the news, Helen Simm, regulatory lawyer and Partner at Browne Jacobson, said: "The FCA has made its decision on the redress scheme marking a significant moment for the motor finance market. Firms face a total bill of £9.1 billion, covering 12.1 million agreements where customers were left in the dark about commission arrangements.

“For businesses, the immediate challenge is execution. Firms will need to move quickly to identify in-scope agreements, assess exposure and stand up robust complaint and redress processes. This is a major governance, operational and customer communications challenge.

“The FCA has sought to strike a balance that is fair for consumers and proportionate for firms, though lenders should be under no illusions: a dedicated supervisory team, backed by full enforcement powers, will be watching closely. The scheme aims to deliver certainty for consumers and finality for firms, investors, and the market.

“The announcement also reinforces a broader lesson for any business involved in credit and other forms of intermediation. Disclosure must be clear, prominent and meaningful. Firms that respond well have an opportunity to resolve historic issues in an orderly way and begin rebuilding trust in the market. The focus now must be on readiness and demonstrating that fair treatment of customers is embedded in practice, not just in policy."