Complex Law is submitting a detailed response to the FCA’s CP25/27 Motor Finance Consumer Redress Scheme consultation – and we’re pressing for a scheme that delivers full, not average, redress for everyone harmed by undisclosed commission and conflicted dealer incentives in PCP and HP agreements.
What’s happening – in plain English
The FCA plans a statutory redress scheme for customers who took out motor finance (including PCP) between 6 April 2007 and 1 November 2024, where commission and “discretionary commission arrangements” (DCAs) weren’t properly disclosed and likely pushed up the APR.
In its draft approach, the FCA proposes to estimate loss by reducing a borrower’s APR by a flat 17% (“APR-17%”) and, in many cases, to average that figure with a commission-repayment amount (a “hybrid” remedy).
We believe this structure will often underpay consumers – compared to what a fair, case-specific calculation would produce.
Why the draft scheme risks short-changing consumers
A one-size-fits-all 17% APR cut isn’t an accurate loss measure. It’s a policy average based on time-restricted data; many borrowers will have paid more than that uplift because DCAs skewed rates at the point of sale.
The hybrid approach (averaging the APR-17% outcome with commission repayment) dilutes compensation. Even the FCA’s own worked examples show that commission repayment can be ~57% to ~324% higher than the 17% APR figure.
The analysis leans heavily on 2019–2022 loan-level data (after the DCA ban and in low-rate years) because some lenders didn’t provide earlier years – a restriction that tends to understate the APR gap consumers suffered when DCAs were rife.
Using the broker’s DCA “minimum” APR as a floor can artificially limit redress and embed the very incentive structure that caused the harm. A default of Base rate + 1% (simple) won’t make many consumers whole; long-standing court/FOS practice supports 8% simple in appropriate cases.
What Complex Law is pushing for – so you get the maximum redress
- “Higher-of” remedy, not an average. Consumers should receive whichever is greater: (a) full commission repayment (where appropriate), or (b) a properly calculated APR counterfactual – with an APR floor that protects, not limits, outcomes.
- Re-estimate APR losses using the full pre-ban window (2007–2020). If lender data are missing, use robust independent benchmarks rather than the DCA floor. Publish methods so outcomes are transparent.
- Treat high/tied commission more robustly. Lower the thresholds that trigger commission repayment and capture de facto ties (volume targets, clawbacks, scale-rate subsidies) that have pushed APRs up.
- Fair interest, applied year-by-year. Set Base + 3% as a minimum or presume 8% simple where warranted, calculated per year of overcharge, not a single weighted average.
- Consumer-friendly presumptions and proof standards. If firms can’t evidence adequate disclosure, unfairness and loss should be presumed.
- No unilateral set-off. Redress should not be automatically netted off against other balances unless the consumer explicitly agrees. Many people need the cash to address wider detriment.
- Clear letters, real deadlines, public oversight. Longer, realistic opt-in windows, full calculation packs with every offer, and firm-level performance data published so consumers can see who is delivering.
What this means for you
If you took out PCP or HP between 2007 and 2024, you could be in scope even if you’ve never complained – and even if your paperwork is missing. The scheme should presume poor disclosure unless the lender proves otherwise.
If you have already complained, you should be contacted promptly once the scheme starts; we are pressing for shorter timelines and stronger protections so you don’t wait unnecessarily. If you receive an early offer, it must be fully explained and should reflect the higher-of available remedies with appropriate interest, not an averaged compromise. We’ll challenge anything less.
Our commitment
Complex Law has acted in this area from the outset and will continue to advocate relentlessly for clients and all victims of the PCP scandal – challenging calculations, resisting unfair floors and averaging, and pushing for a scheme that meets the legal principle of putting you back where you should have been.
If you have a PCP or HP agreement and want tailored guidance on your potential redress, get in touch, and our specialist team will review your position and next steps.
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