Fca Consumer Finance For Cars

Here’s what FCA consumer finance for cars covers in August 2025.

## What the FCA Regulates in Car Finance

• Motor finance firms (including PCPs and HPs) must follow FCA rules under the Consumer Credit Act 1974. This includes clear obligations on disclosure, affordability checks, and fair contractual terms. 
• Under the FCA’s Consumer Duty, effective since 31 July 2023, firms must ensure car finance products deliver good outcomes—this means fair value, transparent language, and proper support throughout the contract. 
• FCA actively reviews the motor finance market, focusing on harmful practices like discretionary commission (DCA) schemes, affordability issues, and opaque product structures. 

## Car Finance Mis-Selling & Redress Underway

• In October 2024, the Court of Appeal ruled that car dealers charging undisclosed commission (i.e. DCAs) without customer consent was unlawful. 
• A hold on complaint deadlines was applied: lenders now must respond by at least 4 December 2025, and affected customers have until 29 July 2026 (or 15 months after a firm's final response) to escalate to the Financial Ombudsman. 
• On 1 August 2025, the Supreme Court narrowed the grounds for compensation based on DCAs—but still acknowledged mis-selling in specific circumstances. 
• The FCA announced on 3 August 2025 it will consult on an industry-wide redress scheme by early October 2025, with the objective of starting payouts in 2026. 

## What It Means for Consumers

• The redress scheme likely covers car finance agreements dating as far back as 2007, especially where DCAs created an unfair relationship—though peers are urging the FCA to align eligibility with the six-year statutory limitation.
• Estimated total compensation ranges between £9 billion and £18 billion, with individual payouts under roughly £950–£1,100. 
• The FCA urges consumers to file complaints directly to their finance providers—avoid claims management companies, which can take a significant fee. 

## What does this mean for your business?

Disclosure is key.

Any business offering Car Finance should disclose its commission on relevant documents to customers at or before the point of sale.

Legal Advice

Firms need to evaluate their frameworks around

- Mis selling 

- Conflicts of Interest

Frameworks need to meet consumer duty requirements and be updated to reflect the changes in requirements around disclosure.

Firms who may have failed to disclose commission need to review their systems, taking legal advice to ensure they understand the legal implications and extent of their liabilities.

Addressing Your Key Challenges

Our blog addresses the burning questions and challenges faced by potential clients, including:

• Frameworks for motor consumer finance
• Systems
• Controls
• FCA Compliance

We provide clear, actionable insights to help you navigate these complexities effectively.