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UK financial services: FCA motor finance compensation scheme; FCA-FOS oversight framework; no further action on FPP; FSCS 2026/27 MELL set; other regulatory developments (31 March 2026)

Published on: 31 March 2026

Published by a LexisNexis Financial Services expert
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Financial services developments

FCA proceeds with motor finance compensation scheme

The FCA has finalised an industry-wide motor finance redress scheme, setting out rules in Policy Statement PS26/3 to compensate customers treated unfairly after courts ruled that firms failed to disclose key commission structures. The watchdog said a scheme is the fastest and most economical way to deliver redress while providing greater certainty for firms, investors and the wider market. Following consultation CP25/27, it has tightened the scope and lowered the expected overall cost.

Agreements for motor finance entered between 6 April 2007 and 1 November 2024, where a lender paid commission to a broker, will be reviewed for compensation. Consumers will generally qualify if they were not informed about a discretionary commission model, a high-commission arrangement, or specified contractual links between lender and broker. Some cases are excluded, including lower-commission deals, zero-interest borrowing and certain high-value loans.

The final package trims the number of potentially eligible agreements to 12.1 million, down from 14.2 million proposed at consultation, with anticipated redress of around £7.5 billion...

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