The Financial Conduct Authority has told motor finance lenders to strengthen parts of their implementation plans after finding that some firms had not provided enough detail to demonstrate how they would deliver the Motor Finance Compensation Scheme in practice.

The FCA published its findings on 19 August 2026 after reviewing implementation plans submitted by firms within the scope of the scheme [1].

Most firms demonstrated a good understanding of the requirements. However, the regulator found that many plans remained too high level, with insufficient detail about how key processes would actually work. In some cases, this meant the FCA could not assess whether firms would be able to meet their obligations.

The findings provide a fresh indication of the operational work still taking place behind the scenes as lenders prepare to deal with potentially large volumes of car finance claims.

FCA Reviews How Lenders Plan to Deliver the Scheme

Around six weeks after publishing the Motor Finance Compensation Scheme rules, the FCA asked affected firms to explain how they intended to deliver fair, consistent and timely outcomes for consumers.

The regulator assessed plans across six main areas. These covered operational readiness, identifying customers and agreements, group based decision making, compensation calculations and payments, quality assurance and cases involving multiple representatives.

The FCA stressed that its findings represent a snapshot of the plans at the time they were submitted. Some lenders may have made significant progress since then.

Nevertheless, the regulator has told all firms to consider its examples of good and poor practice and make changes where necessary.

Some Plans Lacked Practical Detail

One of the FCA's main concerns was the gap between understanding the rules and demonstrating how they would be implemented [2].

Stronger plans explained how customers would move through the scheme, how relevant agreements would be identified and who would be responsible for individual stages of the process.

Weaker plans sometimes repeated the requirements of the scheme without explaining the systems, workflows, staffing or procedures that would be needed to process cases at scale.

The regulator also identified concerns where lenders expected to rely on brokers, outsourced providers or other third parties without clearly explaining their responsibilities or what would happen if information was unavailable.

This could be particularly important given the historic nature of agreements potentially affected by car finance mis-selling.

Historic Records Remain an Important Issue

Identifying which customers and agreements fall within the scheme is another area receiving FCA attention.

The regulator said firms need a clear and evidence based understanding of the number of customers, agreements and complaints that may be within scope.

Some implementation plans did not adequately explain how those numbers had been calculated, validated or checked against other information.

The FCA also identified weaknesses in how some firms planned to deal with missing or incomplete historic data.

Some lenders may need information held by brokers or other third parties. The regulator expects firms to understand what information they require, where it can be obtained and what they will do if records are incomplete, unavailable or held by a business that has ceased trading.

For consumers considering a car finance claim, this highlights the complexity involved in assessing agreements that may have been entered into many years ago.

FCA Raises Questions About Automated Decisions

Many lenders expect to use group based decision making to process large numbers of agreements efficiently.

The FCA accepts that this approach can support consistent processing. However, it found that some plans did not provide enough information about the methodology, evidence and controls behind these decisions.

This was a particular concern where automated systems could be used to process agreements at scale.

The FCA wants firms to be clear about which decisions will be automated and which will require human judgement.

It also expects lenders to demonstrate how decisions will be recorded, checked and escalated when necessary.

These decisions could directly affect whether individual consumers receive car finance compensation.

Compensation Calculations Also Face Scrutiny

The regulator also reviewed how firms intend to calculate and eventually pay compensation.

Some plans simply stated that the FCA car finance methodology would be followed without explaining how the calculation would work operationally.

The FCA found limited detail in some submissions about validation, identity checks, fraud controls and payment reconciliation.

Many firms intend to use automated compensation calculators. Stronger plans explained the data inputs, calculation process, testing, governance and checks that would support those systems.

Weaker submissions did not always make clear whether calculations would be automated, completed manually or use a combination of both.

The FCA expects lenders to be able to demonstrate that compensation calculations will be accurate, consistent and auditable at scale.

Quality Checks Need Further Development

Another area highlighted by the FCA was quality assurance.

Many firms had established governance and reporting arrangements, but their plans contained less detail about how individual decisions would be tested.

The regulator wants lenders to establish appropriate sampling, escalation procedures and processes for identifying and correcting errors.

It also expects firms to maintain oversight of automated systems, outsourced services and third parties involved in delivering the scheme.

This is particularly important given the number of agreements that could eventually need to be assessed.

Multiple Representatives Could Create Complications

The FCA also considered cases where more than one professional representative may be recorded as acting for the same customer.

Stronger plans included processes for identifying these situations early and checking which representative had authority to act.

Weaker plans did not always explain how competing claims of representation would be resolved or how duplicate payments would be prevented.

The regulator also highlighted the need to check whether professional representatives remain authorised and operational, particularly where complaints have been paused for a significant period.

Consumers are not required to use a claims management company or solicitor to make a complaint about motor finance [3]. They can complain directly themselves. Some motorists may still choose regulated professional representation if they prefer assistance with their car finance claims.

What Does This Mean for PCP Claims?

The FCA's latest findings concern the implementation of the wider Motor Finance Compensation Scheme rather than a separate process specifically for PCP claims.

However, eligible Personal Contract Purchase agreements can be relevant to the scheme.

Someone with a potential PCP claim or other complaint relating to mis-sold car finance will still need their individual agreement assessed against the applicable scheme rules.

The FCA's latest feedback is therefore important for consumers with potential PCP finance claims because it focuses on whether lenders have the data, systems and controls required to identify agreements and reach consistent decisions.

It does not mean that every PCP car finance agreement qualifies for PCP refund or compensation.

The Scheme Remains Partially Suspended

The latest FCA publication does not lift the partial suspension affecting the Motor Finance Compensation Scheme [4].

The regulator confirmed on 19 August that the scheme remains partially suspended. Firms must nevertheless continue complying with all rules that have not been suspended.

This means lenders are still expected to prepare operationally even though parts of the compensation process cannot currently proceed.

The latest review provides evidence that this preparation is actively being scrutinised by the regulator.

What Happens Next?

The FCA has told firms to address gaps where implementation plans remain too high level or important areas are still being developed.

Lenders are expected to be able to demonstrate how they have identified relevant customers, how cases will move through their systems, how decisions will be made and checked, and how compensation will eventually be calculated and paid.

The regulator will continue engaging with firms where concerns remain. Some lenders could receive individual feedback or requests for further information if their plans do not demonstrate sufficient readiness.

For consumers affected by the car finance scandal, the latest update does not change whether an individual agreement is eligible for redress.

Instead, it provides a clearer picture of the work lenders are expected to complete before the scheme can operate effectively at scale.

The FCA's message is clear. Understanding the compensation rules is not enough. Firms need to demonstrate that the systems, data, staff and controls required to deliver car finance refund or compensation will work in practice.

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References:

1. The FCA published its findings on 19 August 2026 after reviewing implementation plans submitted by firms within the scope of the scheme - https://www.fca.org.uk/publications/good-and-poor-practice/feedback-motor-finance-redress-scheme-implementation-plans
2. One of the FCA's main concerns was the gap between understanding the rules and demonstrating how they would be implemented - https://www.regulationtomorrow.com/2026/08/fca-feedback-on-motor-finance-redress-scheme-implementation-plans/
3. Consumers are not required to use a claims management company or solicitor to make a complaint about motor finance - https://www.fca.org.uk/news/press-releases/fca-launches-nationwide-car-finance-campaign
4. partial suspension affecting the Motor Finance Compensation Scheme - https://www.fca.org.uk/news/statements/motor-finance-scheme-partially-suspended