FCA extends motor finance consultation deadline
By Josh White
Date: Wednesday 05 Nov 2025
(Sharecast News) - The financial regulator extended the deadline for responses to its proposed compensation scheme for mis-sold car finance on Wednesday, following mounting pressure from lenders, dealers and consumer groups seeking more time to analyse its complex market data.
The Financial Conduct Authority (FCA) said the consultation, which opened on 7 October, would now close at 1700 GMT on 12 December instead of 18 November.
It said it had received extensive feedback since launching the process, with many respondents citing the need for additional time to review data and assess the impact of the proposed industry-wide redress scheme.
The FCA's consultation followed an August 2025 Supreme Court ruling confirming that lenders were liable for unfair motor finance arrangements, including the widespread use of discretionary commission models that allowed dealers to set higher interest rates for larger commissions.
The scheme could cover an estimated 14.2 million loan agreements issued between 2007 and 2024 and was expected to cost lenders about £11bn, making it one of the biggest compensation exercises in UK financial history.
Issues raised in the consultation included how redress will be calculated, the rate of compensatory interest, the period covered by the scheme, and how smaller firms could implement it efficiently.
Stakeholders had also questioned how independent mechanisms such as the Financial Ombudsman Service would ensure confidence in the process, how fraud would be prevented, and how relationships between car manufacturers and their finance arms would be handled.
The FCA said it "continues to welcome and encourage responses" before the new deadline, adding that it expected to publish final rules in early 2026, likely in February or March.
"It's important we receive as much evidence as possible on specific concerns through the consultation as well as alternative suggestions if respondents don't agree with our proposals," the regulator said.
"Complaints cannot be paused indefinitely.
"It is therefore important, in particular for lenders, to maintain the pace so we can draw a line under this issue and bring certainty to their customers, the market and investors."
Lenders had already started setting aside large sums to meet potential liabilities.
Lloyds Banking Group, parent of Black Horse, had increased its provision to £2bn from £1.2bn, while Close Brothers nearly doubled its to £300m and Barclays almost quadrupled its to £325m.
Santander UK, which had earmarked £295m, recently delayed publication of its third-quarter results, citing ongoing uncertainty in the sector.
Chief executive Mike Regnier urged the government to intervene, warning that without support, "the unintended consequences for the car finance market, the supply of credit and the resulting negative impact on the automotive industry and its supply chain could significantly impact jobs, growth and the broader UK economy."
Industry bodies were broadly welcoming of the FCA's decision to extend the consultation.
Sue Robinson, chief executive of the National Franchised Dealers Association, said the extension "provides a vital opportunity for the industry to submit robust, evidence-based feedback that reflects the realities of the market," adding that the group would continue to work closely with the FCA to ensure a fair and proportionate outcome for both consumers and dealers.
Consumer advocates, however, voiced concern that the regulator's approach could favour lenders.
The All-Party Parliamentary Group on Fair Banking criticised what it called a "£4.4bn gap" in the proposed compensation framework, accusing the FCA of being too influenced by banks' profit margins.
Reporting by Josh White for Sharecast.com.
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