Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), accused banks of attempting to undermine a planned compensation scheme for motor finance customers, equating their efforts to "foxes guarding the henhouse." Rathi expressed concern over the industry's slow progress in preparing for the scheme, which is intended to address historic misconduct where lenders failed to disclose commission arrangements to customers, leading to higher payments for many. He specifically called out lenders for not providing complete datasets, making it difficult for the FCA to refine its estimates of redress and operational costs.
The FCA's scheme, unveiled in February 2026, aims to compensate consumers for agreements made between April 2007 and November 2024. The regulator estimates that the total cost to firms, including redress and non-redress expenses, will be around $9.1 billion, down from an initial estimate of $11 billion. This figure includes approximately $7.5 billion in direct redress to customers, with an average payout of roughly $830 per agreement. The scheme is designed to process 12.1 million eligible agreements, with the FCA expecting 75% of eligible consumers to make a claim.
According to Rathi, the root cause of the issue is lender misconduct, specifically the failure to properly disclose commission arrangements, which denied consumers the necessary information to make informed decisions and often resulted in them paying more than they should have. The FCA's review of 4,041 casefiles indicated that in 60% of discretionary commission arrangement (DCA) cases and 78.1% of non-DCA cases, customers were only vaguely told that commission *might* be or *would* be paid, rather than the specific details or amounts. In none of the DCA cases reviewed were customers informed of the actual commission amount paid. Furthermore, the FCA found undisclosed "right of first refusal" (ROFR) clauses in 13.5% of DCA case files and 9.5% of non-DCA case files. The FCA believes that an industry-wide scheme is the most efficient way to resolve this widespread issue, which has been legally challenged by some lenders, although the FCA is defending its position robustly. The Upper Tribunal suspended parts of the scheme on July 2, 2026, pending the conclusion of the legal process.
