FCA’s £11bn redress plan: the big questions for motor finance firms

Core Viewpoint - The FCA's proposed motor finance redress scheme is estimated to cost the industry around £11 billion, which includes £8.2 billion in compensation for customers and £2.8 billion in implementation costs [1] Group 1: Industry Concerns - The Finance & Leasing Association (FLA) expresses skepticism about the FCA's figures, suggesting they are "too high" and calling for transparency regarding the assumptions behind the estimates [2] - Firms are questioning the FCA's modeling, particularly regarding participation rates and assumed losses, especially for non-prime and smaller lenders [2] Group 2: Implementation Challenges - The FCA intends for lenders, rather than brokers, to administer the redress, which places a significant operational burden on lenders [3] - Firms will need to identify eligible customers, assess unfairness, and calculate payouts, often requiring data reconstruction dating back to 2007 [4] - Smaller firms may find the task overwhelming due to data gaps, system limitations, and resource constraints, which could hinder timely and accurate outcomes [5] Group 3: Balancing Fairness and Feasibility - The FCA claims its scheme balances fair compensation with market stability, but firms are concerned about whether the costs and operational demands are proportionate [6] - The consultation period runs until 18 November 2025, with final rules expected in early 2026, prompting the industry to focus on the realism of the FCA's numbers and the feasibility of its plan [7]