Overview
- The APPG on Fair Banking labels the FCA’s motor finance scheme “not fit for purpose”, arguing courts could yield higher payouts, including about £1,500 net in typical discretionary commission cases, and estimating £6.5bn could be paid via the courts.
- The FCA’s consultation remains open until November 18, with final rules expected in early 2026 and a total cost estimate near £11bn for the regulator-run compensation program.
- Eligibility in the proposal covers regulated motor finance agreements from April 6, 2007 to November 1, 2024 where lender-paid broker commission applied, with unfairness tests tied to disclosure, high commission thresholds, or exclusivity clauses.
- Compensation would usually average the overpayment and the commission paid plus base rate plus 1%, with the most extreme cases requiring repayment of the full commission plus interest; the FCA proposes a 2.09% compensatory rate.
- Banks continue to push back, with Santander UK delaying its Q3 results, Lloyds warning of profit hits and raising provisions to £2bn, Barclays lifting provisions to £325m, and executives cautioning about risks to credit supply and the wider auto sector.