A Practical Guide For Dealer Groups, Brokers And Finance Introducers
The FCA has now finalised and launched the commissions redress scheme. It is meant to resolve historic commission disclosure complaints at scale, rather than leave them to ordinary complaint handling, the Financial Ombudsman Service, and the courts.
For dealers, the important point is that the scheme is lender-led, but dealers and brokers are still operationally involved. Complaints may still land with dealers, lenders can demand records, and the tied-arrangement question remains central.
The headline protection for many franchised dealers is the captive/white-label exception. But that amounts to an evidential protection, not a blanket exemption, so dealer groups should be organising documents and escalation routes now.
Why the FCA has done this
The FCA has settled the question of how historic motor finance commission complaints will be handled. Rather than leave millions of complaints to be fought piecemeal through firms, the Financial Ombudsman Service and the courts, it has introduced a formal consumer redress scheme covering motor finance agreements entered into between 6 April 2007 and 1 November 2024.
The scale explains the regulatory choice. The FCA estimates that 12.1 million agreements are potentially eligible for compensation. It expects total redress of about £7.5 billion at 75% participation, with average redress of roughly £830 per agreement, although many consumers will receive nothing and some will receive significantly more.
What the scheme covers
The scheme is split into two parts.
Scheme 1 covers agreements made between 6 April 2007 and 31 March 2014. Scheme 2 covers agreements made between 1 April 2014 and 1 November 2024. The FCA adopted that two-scheme structure so that any challenge to its pre-2014 power position does not hold up the later cohort.
Significantly, the arrangements that really matter are narrower than some of the public commentary suggests. The FCA has fixed on three categories: discretionary commission arrangements, high commission arrangements, and tied arrangements.
A high commission arrangement now means commission of at least 39% of the total cost of credit and 10% of the loan. At the same time, the scheme contains important exclusions and exceptions. Very small commissions are out. Zero-APR agreements are treated as fair for scheme purposes. Personal contract hire does not fall within the same unfair relationship framework. High-value loans are excluded from the mass scheme.
Why the tied-arrangement point matters so much
For many dealer groups, the tied-arrangement issue may be the critical one. The FCA accepts that an undisclosed exclusivity arrangement or right of first refusal can make a lending relationship unfair because the consumer may think the broker is choosing from the market when, in fact, a particular lender has priority.
That said, the final scheme contains an important qualification for captive and white-label finance sold through franchised dealers. Where the lender can show that manufacturer-linked branding or trading names were clearly and prominently presented in the dealer environment, in pre-contract materials, and in the agreement itself, the tie is not treated as a relevant arrangement under the scheme. Put simply, the FCA has accepted that, in many franchised dealer settings, the relationship between manufacturer, finance company, and dealership may have been sufficiently visible that non-disclosure of the tie was not unfair for scheme purposes.
That is a significant point, but it does not provide blanket amnesty. The exception is evidential. Firms must still be able to show the necessary brand presentation and trading-name alignment. Historic website screenshots, showroom standards, finance brochures, IDDs, lender terms and agreement packs may all matter. Dealer groups that assume the captive-lender point speaks for itself may find that the real difficulty is proving what the customer journey looked like years ago.
How the scheme will work in practice
The scheme is lender-led. In other words, lenders are responsible for assessing cases and paying any redress. Consumers who have already complained should receive a scheme outcome more quickly. Consumers who have not complained will only be contacted if the lender identifies at least one potentially relevant arrangement.
That all looks like lenders’ problem. And it is. Mostly. Dealers are nevertheless part of the operational chain. If a consumer complains to a broker about matters within the subject matter of the scheme, that complaint must be sent to the relevant lender. If a lender needs historic material to assess a case, it can require the broker to produce records or confirm that they are no longer held. The response window is short: one month, followed by a further 14-day chase if necessary.
The consumer timetable is designed to be simple. Consumers who complained before the relevant implementation deadline should receive an answer within three months of that date. Non-complainants with at least one relevant arrangement are invited to opt in within six months. If compensation is offered, the consumer has one month to accept or challenge, and payment follows within one month of acceptance. If the consumer remains unhappy, the Financial Ombudsman Service can review whether the scheme rules were applied properly.
What dealers should do now
The first task for most of our members will be operational, not theoretical.
The first task is procedural. We recommend putting a complaint-routing process in place. Staff should know that questions about historic commission disclosure are not to be handled informally or passed around without ownership. Efficiency aimed at timely responses remains essential.
The second task is evidential. Identify where historic finance documents, lender terms, IDDs, branding packs, website material and complaint logs sit, and whether anyone has responsibility for retrieving them.
The third task is prospective. Review current commission disclosure and status wording so that you are not answering 2026 questions with 2018 documents and 2025 assumptions. The FCA’s own diagnostic work shows how poor historic disclosure was. It also shows that lenders and brokers have already moved to standalone disclosure documents and more explicit explanations after the Johnson litigation. Current materials should therefore be consistent, intelligible and defensible.
Finally, do not underestimate the fraud issue. The FCA is requiring unique reference numbers and standard factsheets, and it is publishing a lender list and operating a helpline. Dealers need clear scripts for consumers who are worried that a communication is a scam. That means pointing consumers to the lender’s formal route, not creating an improvised parallel channel.
The practical takeaway
The FCA’s scheme aims at drawing a line under the past. For dealers, however, it will only do that if records, responsibilities and messaging are brought into order now. The scheme may be lender-led, but no sensible dealer group should treat it as somebody else’s problem.
Immediate practical steps
• Nominate one person or team to own scheme-related complaint routing and lender liaison.
• Preserve and organise historic branding, finance, IDD and lender material now, before retrieval becomes harder.
• Review current disclosure wording and staff scripts so that present-day processes do not create fresh inconsistencies.
