After-hours drop: FCA to release motor-finance redress details today — and why a legal challenge is likely

The FCA is set to publish details of its motor-finance redress scheme after markets close today. From our discussions with stakeholders and the FCA, coupled with recent FCA publications, we expect at least one legal challenge to follow quickly — arguing that the proposed design under-compensates consumers.

What we know (and what’s coming tonight)

The regulator plans to set out the scope, eligibility and calculation methodology for redress covering historic illegal and/or unfair commission practices in motor finance (including discretionary commission arrangements). The announcement is timed for after the market close to give firms, investors and consumer groups space to digest the detail before trading resumes.

Where the fights will be

1. How redress is calculated. The FCA’s suggestion of an average award of £950.00 directly contradicts it’s previous submission that consumers were overcharged by £1,100.00 on average. Critics and representatives will argue this under-prices detriment where pricing discretion and sales incentives inflated costs.
2. Eligibility and evidence. Precisely which agreements and years are covered — and what proof is required — will be decisive. Narrow scope or burdensome proof standards will be challenged. Some lenders have been actively deleting data and documentation in an attempt to avoid paying compensation on the basis of a lack of evidence.
3. Process vs outcomes. A streamlined scheme is welcome, but if simplicity trades away fairness, the courts are likely to be asked to intervene.

Why we expect a legal challenge

• The methodology and assumptions behind the scheme will be tested from day one — especially if typical payouts look low relative to the scale of the issue.
• Any approach that doesn’t fully account for pricing discretion, sales incentives and affordability impacts risks being viewed as under-compensatory.
• Given the scale of consumer impact, representative bodies are primed to challenge a scheme they consider too narrow or too shallow.

What happens next

Expect a consultation window, followed by final rules and an implementation timetable. We’ll consider tonight’s documents — eligibility, redress formula, timelines, and routes for challenging outcomes — along with our view on where consumers stand, and will be in direct contact with the FCA on 9th October 2025 following an invitation.

Our view: A credible scheme must price fairness properly, not just process it neatly. If the design released tonight under-compensates, a legal challenge is not just possible — it’s likely.