Motor finance redress is on hold until 2027 – but dealers should prepare now
The FCA's compensation scheme for car finance commission has been partly paused while lenders' legal challenges are heard in February 2027. The pause stops payments, not the paperwork – and much of that paperwork sits with dealers.
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The story
The FCA's motor finance redress scheme covers finance agreements taken out between 6 April 2007 and 1 November 2024 where the lender paid commission to the broker – usually the dealer. The FCA estimates around 12.1 million agreements are eligible and that redress could total £7.5 billion, paid by lenders.
Several lenders, and a consumer group, have challenged the scheme. Since July 2026 the Upper Tribunal has suspended parts of it, so lenders do not yet have to calculate or pay compensation. The challenges are due to be heard in February 2027. In the meantime lenders must still identify the agreements in scope and gather the commission and disclosure information behind them.
What it means for your dealership
Dealers don't pay redress under the scheme – but lenders gathering commission and disclosure information will often need to go back to the dealer who arranged the finance. From an accountant's point of view, three things matter:
- Your records. Old deal files, commission statements and the disclosure wording you gave customers may be asked for. VAT records only have to be kept for six years, but agreements in scope go back to 2007, so think twice before clearing out old files.
- Your agreements with lenders. Check whether yours allow a lender to claw back commission or seek an indemnity from you. If they do, that is a potential cost to plan for.
- Your accounts. If a claim against the business becomes likely, it may need a provision or a note in your year-end accounts. That is a judgement to make with us before the accounts are signed, not after.
What to do now
- Keep deal files, finance paperwork and commission statements from 2007 onwards – paper and digital.
- Pull out your lender and broker agreements and look for commission clawback or indemnity clauses.
- Make sure finance commission is posted to its own account in Xero, so you can show what was earned and when. Our month-end checklist covers how Click Dealer deals and finance payouts should agree.
- Talk to us before your year end if any lender has been in touch.
Sources: FCA – motor finance redress scheme; TCC Group – October 2026 update. Summarised in our own words. This post is general information, not advice for your circumstances; please speak to us before acting.