Garry Evans, TCC Group’s Chief Commercial and Product Officer, reflects on the recent FLA Annual Motor Finance Convention.
The key takeaway from the FLA Annual Motor Finance Convention is clear: If your plan was to wait for the final guidance from the FCA before starting your preparation for the redress scheme, you will be too late, and the FCA will not be happy.
The recent motor finance industry conference left no doubt about the main issue on everyone’s mind: the forthcoming FCA-led redress scheme. With approximately 40% of the agenda dedicated to this single topic, it’s clear that the scheme is now the defining challenge – and opportunity – for motor finance providers in the year ahead.
Diverse stakeholder perspectives
The event featured a wide range of voices, each reflecting on different priorities within the motor finance landscape. Some of the key themes that emerged include:
HM Treasury (HMT) emphasised the importance of keeping the scheme as focused and straightforward as possible, while remaining mindful of its impact on the market.
Legal representatives for automotive finance companies voiced concerns that the draft scheme remained too broad and costly. Many have been working closely with the FCA to ensure tighter parameters.
Compliance consultancy firms were focused on the need to get ready now, ahead of the final guidance: target organisations for the redress scheme must prepare now by getting any and all documentation required to identify the population that will be eligible for the scheme, and collating all the data that is likely to be involved in the redress calculations.
They also suggested that target organisations should be investing in accessing tailored technology to handle redress efficiently and at pace, ensuring that data security and operational integrity are careful considerations. Another reason to get started now is to secure the right team to manage both the scheme and the expected volumes, because when this scheme is initiated, everyone will be scrambling for the same resources. The best ones will be picked up first, and as the resource becomes more scarce, the price will inevitably rise.
Consumer groups, as relayed by the FCA, expressed frustrations, questioning both the pace of the process and the adequacy of proposed payouts (an average of £700, seen as too low by some).
The FCA dispels the misconceptions:
Some of the motor finance providers arrived assuming delays were likely, hoping – and expecting – the FCA might scale back the scheme or push back deadlines to late 2026, with talk of potential judicial reviews.
However, the regulator promptly dispelled such misconceptions. The FCA’s message was clear: the scheme must be delivered swiftly and decisively with very little scope for deferral. As the regulator considers all aspects of the scheme during the consultation period, it has been acknowledged that there needs to be a balance between fairness, accuracy of payment and practical deliverability. More complex loss-calculation mechanisms were reviewed, yet the ultimate need for hard-to-source data would put even more pressure on the firms and extend the scheme beyond what is acceptable.
The FCA is said to be comfortable that the available data and the proposed simplified calculation methodology will enable faster, well-balanced outcomes for customers. And, if there were a few perverse outcomes for a minority of customers who end up getting paid out something where a court case may come up with a different outcome, then that is acceptable to prevent all cases needing to be reviewed in depth through the courts, which would cost billions and take years to complete.
What can firms expect to change, and what stays
Firms should note several likely points of refinement:
- Timelines are unlikely to move much, if at all. Due to previous communications from the FCA, readiness is expected, and preparations starting after the final scheme is announced will be severely frowned upon.
- The overall approach to redress calculation will remain, though tweaks to address obvious anomalies (such as commissioned 0% APR cases) may be made.
- The requirement for recorded delivery letters may be removed.
- Some firms with transparent dealer to Original Equipment Manufacturer (OEM) financial services business relationships may be exempt from the “tied financial institution relationship” definition of unfair relationship assessments, if customer communications were clear at the point of sale.
The real test: how firms deliver redress
Motor finance companies’ reputation has already been damaged by the redress scheme, with customer confidence at an all-time low. How firms execute the redress scheme will either recover some of that lost confidence or make it much worse. Ease of opt-in, speed of processing, accuracy of calculations, and clarity of communications could be the deciding factors in future customer behaviour.
The industry can expect scrutiny. Claims management companies are poised to highlight any failings, so proactive, well-designed redress implementation must form the core of any redress strategy.
Looking ahead: preventing future issues
During the FLA’s conference, it was made clear that compliance and transparency must remain the top priorities well beyond the redress process. Once the current scheme is complete, providers will need robust controls to prevent similar issues in future.
This presents a prime opportunity for innovation: technologies, such as Recordsure AI, can help motor finance firms and their dealer networks maintain consistent, compliant customer interactions. In turn, this will help motor finance firms and their dealer networks to deliver consistent, compliant customer interactions, and the much needed evidence for supervisors, the board and the regulator.
The FCA redress scheme defines the outlook for 2026
The FCA redress scheme is the number one agenda item for 2026. Motor finance firms that invest now in data preparation, technology set-up and robust communications will not only survive the current regulatory wave but also emerge better placed to serve customers and safeguard their reputations as the industry evolves.
At TCC Group, and specifically with our Momenta brand, we have smart people and many years of experience delivering innovative solutions to help firms execute the proposed redress scheme effectively and at pace. We are ready, willing and able to assist with preparations and to validate existing plans. Plus, we don’t stop there; we work alongside clients to establish robust processes and solutions that ensure long-term compliance.
