From where I sit as a compliance consultant, this scheme was always coming. Once the courts established that key information hadn’t been properly disclosed to customers, it became less a question of if there would be redress — and more about how it would be delivered at scale. And it happened on 30th March.
What the FCA has landed on is, in my view, a pragmatic attempt to bring order to what could otherwise have become a very fragmented and expensive process involving lots of actors, some of whom would not have the customer’s best interest at heart. The FCA have taken on board a huge amount of industry feedback — over 1,000 consultation responses — and while not everyone agrees on the detail, the direction is clear: a structured, industry-wide solution is the most efficient way to resolve this.
What stands out to me is the effort to balance competing priorities. On one hand, the FCA wants a scheme that is simple and cost-effective to run. On the other, it needs to be fair and comprehensive for consumers. Inevitably, that creates tension – the devil is always in the details!— but overall, I think the final approach lands in a place that is proportionate for firms while still meeting regulatory expectations on consumer outcomes.
One of the most important shifts, from a firm perspective, is the tightening of eligibility. This isn’t a “catch-all” exercise.
The FCA has been quite deliberate in narrowing the population so that compensation is targeted at customers who were genuinely disadvantaged. Agreements with minimal commission, 0% APR, or clear and visible relationships between lenders and dealers are largely out of scope. That’s brought the numbers down meaningfully — from 14.2 million to around 12.1 million agreements.
On redress, I can see what the FCA is trying to do. They’ve refined the methodology to better reflect historic detriment — particularly in the earlier years — but they’ve also been clear that customers shouldn’t end up better off than if they’d been treated fairly in the first place. Redress is not compensation and it is very common for consumers to confuse the two. The overall redress figure has come down to around £7.5bn, with total costs to firms estimated at £9.1bn.
Operationally, the scheme feels much more deliverable than it did at consultation stage. The FCA has clearly listened to concerns about cost and complexity. Limiting customer contact to those who are in scope, removing requirements like recorded delivery, and giving firms flexibility in communication channels — all of that will make a real difference when it comes to execution. The expectation is that a large proportion of customers will be paid this year, with most of the remainder completed by the end of 2027. As redress schemes go, that is impressive.
Stepping back, I see this as the FCA trying to draw a line under the issue — not just for consumers, but for firms and investors as well. Without a coordinated scheme, firms would be dealing with years of complaints, FOS referrals, and potential litigation. The FCA’s own estimate suggests that could have added over £6bn in additional cost, not to mention the operational strain and regulatory uncertainty.
How I’m advising firms to think about scope
The scope is broad in terms of time — going back to April 2007 — but it’s quite specific in terms of trigger. If commission was paid by a lender to a broker, the agreement is potentially in play.
The decision to split the scheme into two periods (pre- and post-April 2014) is a sensible one in my view. It reduces the risk of legal challenges delaying the entire programme, which would otherwise create even more uncertainty for firms trying to plan.
Where I’d focus on eligibility
In practice, most of the complexity sits here. A customer is only in scope if there’s been a failure to disclose certain types of arrangements — mainly DCAs, high commission structures, or certain types of lender–broker ties.
But the nuance really matters. There are multiple routes for firms to demonstrate that a case is out of scope — for example:
- where commission levels were low
- where no interest was charged
- where a DCA existed but wasn’t actually used
- or where the firm can evidence that the customer didn’t suffer a loss
This is where we suggest firms make sure they have the data, documentation, and audit trail to support those positions. If you’re relying on exclusions, you need to be confident you can stand behind them under scrutiny.
My take on the redress model
Only a relatively small number of cases — those involving the most severe combinations of high commission and non-disclosure — will result in full commission repayment.
For everyone else, the FCA has gone with a hybrid model, which blends estimated loss with commission paid. It’s not perfect, but I understand why they’ve taken this approach — particularly given the data limitations, especially for older agreements. It is finding the right redress balance to try and ensure the customer is back in the position they would have been.
The use of proxy APR adjustments is a practical solution, and the higher adjustment for pre-2014 cases reflect what we already suspected: that detriment was generally greater in earlier years.
The caps on compensation are also important. They reinforce the principle of fairness and help prevent over-redress, which moves into compensation, but they will need to be carefully implemented to avoid challenge.
Delivery is where this will be won or lost
If I’m honest, this is the part that will differentiate firms. The timelines are tight but manageable:
- Implementation by mid-2026
- A short window to assess complaints
- A defined period to contact in-scope customers
The key operational advantage is that firms don’t need to contact their entire customer base — only those who are potentially due compensation. That’s a major cost saving, but it increases the importance of getting your identification logic right.
Don’t underestimate the level of scrutiny
The FCA has been very clear — this will be closely supervised. To ensure this happens, the FCA have put a dedicated team in place, with regular reporting requirements, and a strong focus on Senior Manager accountability. In my experience, that means firms need to be thinking now about governance, oversight, and documentation, not just the mechanics of redress. Remember, if its not written down, it did not happen!
There’s also coordinated action with other regulators to deal with poor behaviour from claims management companies and law firms, which should help reduce some of the noise in the system.
Final thought
If I boil it down, this is now an execution challenge. The firms that will come through this best are the ones that:
- get comfortable with their data
- take a clear and defensible position on eligibility
- build a delivery model that is efficient but well-controlled
- and put strong governance around the whole process
The scheme gives firms a route to certainty and closure. The real question now is how effectively that opportunity is used. The FCA will be watching and if they do not like how firms are managing this, I have no doubt that they will intervene.
