Authorities tighten rules on controversial methods in car loan assertions prior to decision-making
Following a Supreme Court ruling on motor finance commission claims, the UK Financial Conduct Authority (FCA) is preparing to consult on an industry-wide redress scheme. The consultation, set to open in early October 2025, aims to address unfair commissions and insufficient disclosure in motor finance claims.
The Supreme Court's decision, delivered on August 1, 2025, narrowed the scope of successful motor finance claims, focusing on factors such as commission size, disclosure, and related issues under the Consumer Credit Act (CCA). The FCA's redress scheme will be designed to provide clarity and consistency after prior legal uncertainty.
Law firms and claims management companies (CMCs) are expected to adhere to fair practices, especially regarding financial promotions, to avoid misleading consumers and to comply with regulatory standards. The FCA has warned against problematic marketing practices related to motor finance claims and has stressed the importance of integrity in complaint handling.
As of August 2025, the FCA has required 224 motor finance commission promotions to be amended or withdrawn over the last year. The regulators have also expressed concern about some practices in the market, including providing inaccurate or misleading information on the likelihood of success or the potential value of a claim, and advertising highly speculative figures for motor finance commission claims.
The Supreme Court is expected to rule on a future case related to motor finance commission claims. The FCA has stated that if it introduces a redress scheme for motor finance, consumers will not need to use a CMC or a law firm. The potential redress scheme for commission fees in motor finance claims remains a topic of ongoing concern for the FCA and Solicitors Regulation Authority (SRA).
Investigations by the SRA have revealed that as of June 30, there are 89 live investigations into 73 law firms, linked to potential breaches of its rules relating to high-volume claims work. Consumers may end up paying for a service they do not need and losing up to 30 per cent of any money they may receive if they sign up with a CMC or law firm before the redress scheme is implemented, according to Howard.
Both the SRA and the FCA have urged law firms and CMCs to inform clients of the potential redress scheme over commission fees. The SRA's Chief Executive, Paul Philip, has expressed concern about some practices in the motor finance commission claim market. The FCA and SRA are monitoring the practices of law firms and CMCs in the motor finance commission claim market and have stated that they are working closely together on this issue, ready to investigate and take action against the firms where necessary.
The Supreme Court will deliver its decision on the appeals of two lenders whose cases were previously deemed by the Court of Appeal to involve unlawfully obtained commissions on motor finance, without the customer's informed consent, on a future date. The FCA has stated that it will make a decision on whether to introduce a redress scheme within six weeks of the Supreme Court ruling.
The redress scheme, set to be operational in 2026, aims to provide orderly, consistent, and efficient consumer compensation while maintaining market integrity. The FCA intends for this scheme to compensate customers who were treated unfairly, ensuring fair and efficient redress and protecting future consumers.
The Supreme Court's judgment on motor finance commission claims has sparked a response from the FCA, who plan to consult on an industry-wide redress scheme in October 2025, focusing on fair finance practices in business dealings, as part of their efforts to address commission-related issues and improve disclosure in motor finance claims. In the event that the FCA introduces a redress scheme for motor finance, consumers may not need to engage services of claims management companies or law firms.
