Clifford Chance

In anticipation of the Supreme Court's judgment on the Hopcraft and another v Close Brothers Limited appeal on motor finance commission arrangements, the FCA has outlined steps for a potential industry-wide redress scheme. More detail will be released in due course, but this post sets out the key indications given by the FCA so far.

Since January 2024, the FCA has been reviewing the past use of motor finance discretionary commission arrangements (“DCAs”) to examine whether consumers have been disadvantaged by firms’ misuse of such arrangements.

On 11 March 2025, the FCA announced in a press release that if, taking into account the Supreme Court's decision in Hopcraft (the "Judgment"), it concludes motor finance customers have lost out from widespread failings by firms, then it is likely it will consult on an industry-wide redress scheme. The judgment is expected in July 2025 and the proposed subsequent redress scheme will not only relate to DCAs but may also extend to commission disclosure failures. We noted that development in our previous RIFC Insights blog post.

The FCA has now published its key considerations in relation to such a redress scheme.

The FCA has made clear its wish to get any redress scheme up and running as quickly and efficiently as possible. With that in mind, it has already commenced pre-consultation engagement with stakeholders, in order that it can progress the implementation of the scheme as rapidly as possible following the Judgment. In its latest announcement, it notes that, in view of these pre-consultation steps, there may therefore be a shorter than usual consultation window in relation to any redress scheme.

As part of its key considerations, the FCA has outlined the principles which would guide the design of a redress scheme:

• Comprehensiveness – covering the widest range of complaints possible
• Fairness – in determining breaches and calculating redress
• Certainty – finality for consumers and firms
• Simplicity and cost effectiveness – accessible to consumers and proportionate for firms
• Timeliness – claims resolved within a reasonable timeframe
• Transparency – clear explanations of decisions for consumers and publicly available data on scheme progress
• Market integrity – support ongoing availability of high quality and competitively priced motor finance

In its latest announcement, it correctly notes that, in some areas, these priorities may not completely align with one another and has issued an early call for all interested parties to contribute to the consultation when it is released to seek to achieve the right balance.

The fundamental point the FCA has indicated it is considering is whether the scheme should be opt-in or opt-out. It cites greater simplicity as a likely benefit of an opt-out scheme, but notes that this would be more expensive for firms and may take longer to implement, especially where consumer address data is no longer up to date.

The FCA has stated that it will not necessarily treat Financial Ombudsman Service decisions as precedent, but instead intends to adopt a comprehensive approach, informed by the Judgment and its own statutory objectives, also being mindful of the future integrity of the motor finance market.

As to next steps, the FCA intends to confirm within six weeks of the Judgment whether a redress scheme will be proposed and what the timings of any consultation exercise will be. If the scheme goes ahead, the FCA expects that it will be implemented in 2026.