Motor Finance Remediation - Next Steps

After an eventful few days following Friday’s judgment from the UK Supreme Court and the FCA’s announcement on Sunday, it felt timely to share our thoughts on key considerations and next steps firms should be thinking about in advance of the FCA launching its consultation on a redress scheme. 

The FCA intends to publish its consultation paper in early October and expects a redress scheme to be operational in 2026. 

Our expectations are that the work done leading up to the consultation and during the consultation period will enable the FCA to publish a relatively short implementation period, with firms being expected to commence redress payments in the first half of 2026. 

With this in mind, there are some recommended next steps for firms:

1. Assess your current redress provision and recalculate where necessary – The FCA has provided detail on the likely scope of the redress scheme and the likely interest that will be proposed. This should enable firms to re-examine their current estimations on case volumes, redress payments and operational costs to ensure they are sufficiently provisioned to deal with the redress scheme. This may involve adjustments up or down depending on the work that has been undertaken so far.

2. Consider how you will respond to the consultation when it is issued – Firms can choose to whether to respond to the consultation individually, collectively through trade bodies, or through a combination of the two. Making this decision will help firms prepare for how they internally and externally engage in advance of, and during, the consultation period. Given the short consultation period, it is important to plan in advance to ensure all views are shared with the FCA in response. 

3. Prepare for a potential increase in incoming complaints/enquiries – The recent Supreme Court case and FCA announcement will generate more consumer and third-party interest in this issue. The FCA announcement has also reminded consumers that they are able to lodge a complaint now if they believe they have been or may have been impacted. Firms need to consider whether they have sufficient resources in place internally or via a third party to respond to this increase in activity over the coming weeks. 

4. Review your data workstream to identify any gaps – Whilst the Supreme Court judgment on Johnson was very fact specific, the FCA has now identified factors/data points that may be required collectively to assess whether the relationship between the finance company and the customer was unfair. It is important firms take steps over the next few months to ensure they are gathering all information that may be relevant to the final redress scheme, to ensure they are prepared to operationalise an approach in 2026. The following is a list of data points to consider:

A) The nature of the relationship between the dealer/broker and the finance company – this should include the nature of any discretionary commission arrangements and the existence or nature of any tied arrangements and expected disclosure obligations. 
B) The nature of disclosure to the customer during the sales process – this may involve gathering documents from brokers/dealers to understand the detailed information the customer was given.
C) The size of the commission relative to the total charge for credit
D) The characteristics of the customer – this will likely involve reviewing the level of customer information available and determining what data points may be meaningful in assessing the customer’s circumstances. 

By creating a single source of data, or multiple sources that can interact effectively together, will enable you to quickly interpret the impact of the FCA’s consultation when it is released, and more importantly execute the redress scheme. 

5. Reflect on your current programme -  The nature of this weekend’s announcements gives you a sense of the likely scale of this redress exercise and the level of complexity that may be involved. A professional and experienced programme team, with strong remediation experience is key to ensuring you are adequately prepared, considering all relevant factors (both legal and regulatory) and selecting the most efficient and effective ways to deliver outcomes to customers. 

Consider:

A) Programme management – have you got the right levels of expertise and are you making progress that would enable you to operationalise a redress scheme in the first half of 2026?
B) Data workstream – Have you got enough expertise to extract, cleanse and analyse the internal data, or gather data from third parties?
C) Customer journey design – Have you started to think about what an opt in or opt out customer journey might look like, what customer communication options are available and how you would execute customer contact and payments at scale?
D) Design and execution support – Have you got the right expertise internally or with existing partners to:
- plan for multiple scenarios
- build mock treatments and redress methodology
- interpret the FCA redress scheme for different customer cohorts
- build customer communications;
- create a robust prioritised delivery plan; and 
- execute customer contact activity at scale, with the right level of SME input and quality assurance? 
E) Governance and assurance – Have you got the right governance structure in place for your programme? Are you leveraging the best of internal expertise? Have you started to create an Assurance plan that will provide confidence to Exco and the Board that nothing is being missed?

One of the biggest challenges with remediation activity is that seemingly small errors or  omissions can ripple through the population at scale, leading to poor customer outcomes and additional costs. Whilst perfection is hard to come by, preparation is key to reduce significant issues.   

For a copy of Konexo’s detailed Remediation and Redress Planning guide please email IanStott@konexoglobal.com or EmmaMitchell@konexoglobal.com.