The FCA’s motor finance redress scheme marks one of the largest consumer compensation exercises in recent years, requiring firms to review historic PCP and other finance agreements at scale and deliver consistent outcomes to millions of customers. For many firms, the immediate focus is operational: identifying affected cases, assessing fairness, and paying redress within the scheme’s timelines.
However the scheme does not exist in isolation from other FCA requirements, in particular on the fair treatment of vulnerable customers. Firms are required to recognise and respond to individual needs across the customer journey. In practice, this creates a layered challenge. A high-volume, largely standardised remediation process must still accommodate customers whose circumstances make them more susceptible to harm. Given the financial issues at stake, vulnerable customers may at be at higher risk for unscrupulous actors and may require more support to access their compensation.
How the motor finance issue developed
Personal Contract Purchase (PCP) and other motor finance arrangements have dominated the UK car market for over a decade. The FCA identified widespread failings in three areas:
- Discretionary commission arrangements, where brokers could increase interest rates to earn more commission
- High commission structures that materially increased the cost of credit
- Exclusive or tied relationships that limited consumer choice
These practices created clear conflicts of interest. In many cases, customers were not told how dealers were incentivised, which meant they could not make informed decisions.
The regulator banned discretionary commission arrangements in 2021. That did not resolve historic harm. Subsequent supervisory work and legal developments exposed the scale of the issue, with millions of agreements potentially affected.
Courts reinforced the position that non-disclosure of commission and unfair relationships could breach consumer credit law. This provided the legal foundation for a mass redress exercise.
The FCA has now confirmed an industry-wide compensation scheme covering agreements between 2007 and 2024, with around 12 million agreements in scope and expected redress of roughly £7.5bn to £9.1bn.
Consumers do not need to use claims management companies. They can complain directly to lenders through a free process.
The redress scheme: operational and conduct implications
The scheme is designed to standardise how firms assess complaints and calculate compensation. It also places clear expectations on firms to proactively contact customers in certain cases.
Key features include:
- Eligibility linked to undisclosed commission or unfair arrangements
- Average compensation of around £800 per agreement
- Staged implementation through 2026, with payments continuing into 2027
- A largely firm-led review process
This shifts the burden onto firms to identify affected customers, assess fairness, and deliver consistent outcomes. Many firms will be handling hundreds of thousands of cases. That volume creates inherent risk, particularly when vulnerability is layered on top.
Vulnerable customers: where the real risk sits
The FCA’s guidance defines a vulnerable customer as someone who, due to personal circumstances, is especially susceptible to harm if a firm does not act with appropriate care. Vulnerability is dynamic and can affect any customer at any point and may affect up to half of all consumers in the UK.
In the context of PCP redress, vulnerability risk emerges in several ways.
First, financial pressure. Many affected customers may already be under strain due to the cost of living. Compensation expectations can heighten anxiety or lead to poor decision-making.
Second, information asymmetry. The redress process is complex for some people. Customers may struggle to understand eligibility, timelines, or outcomes.
Third, behavioural vulnerability. Some individuals are more susceptible to scams or misleading offers, particularly where there is a promise of compensation.
Fourth, situational vulnerability. Bereavement, illness, or cognitive impairment may affect a customer’s ability to engage with the process.
The FCA expects firms to deliver outcomes for vulnerable customers that are as good as those for other customers. In a mass redress exercise, that expectation can become more challenging. It requires firms to identify vulnerability at scale and respond appropriately without introducing inconsistency or delay.
The risk of claims management firms and scams
A notable feature of the current environment is the rise in third-party claims firms and outright scams. The FCA has been explicit: customers do not need to pay to make a claim.
Despite this, some businesses are:
- charging fees for submitting simple complaints
- implying that compensation is guaranteed
- presenting themselves as affiliated with lenders or regulators
- targeting customers through unsolicited contact
For vulnerable customers, these practices can cause direct financial harm. They can also distort expectations and increase friction around complaints for vulnerable customers who may not have fully understood they were able to make a claim for free. Vulnerable customers could be more likely to fall victim to the fraudulent scams which will balloon around the redress scheme.
There is a clear conduct risk here. Firms that fail to counter misinformation or fail to support customers through the process may contribute to poor outcomes, even if they are not responsible for the third-party activity itself.
Practical guidance for supporting vulnerable customers through PCP redress
Firms need a structured response that integrates complaints handling, vulnerability frameworks and financial promotions controls.
Make the direct route to redress clear
Customers should be able to understand, without ambiguity:
- Whether they may be eligible
- How to complain directly to the firm
- What information they need to provide
- Expected timelines and next steps
Communications should be simple, consistent and repeated across channels.
Identify vulnerability early in the process
Complaint intake and customer contact points should include mechanisms to:
- Capture indicators of vulnerability
- Allow customers to disclose needs comfortably
- Flag cases requiring tailored handling
This aligns with the FCA expectation that firms should understand the needs of their customer base and respond appropriately.
Adapt processes for vulnerable customers
Standardised processes will not be sufficient in all cases. Firms should be ready to:
- Extend deadlines or provide additional time
- Offer alternative communication channels
- Simplify explanations of outcomes
- Involve third-party representatives where appropriate
Flexibility is central to delivering fair outcomes.
Train frontline staff for high-volume vulnerability
Staff handling PCP complaints need more than procedural training. They require:
- The ability to recognise vulnerability signals
- Confidence to deviate from standard scripts where necessary
- Clear escalation routes for complex cases
The FCA emphasises the importance of staff capability in achieving good outcomes.
Monitor outcomes, not just process
Management information should focus on outcomes for vulnerable customers, including:
- Complaint resolution times
- Compensation consistency
- Customer understanding of decisions
- Repeat contact or confusion indicators
Firms should be able to demonstrate that vulnerable customers are not experiencing worse outcomes.
Actively counter scams and misinformation
Firms should take a proactive stance by:
- Warning customers about claims management fees
- Clearly stating that the process is free
- Identifying common scam tactics in communications
- Coordinating messaging across websites, letters and call centres
This is a practical step to reduce foreseeable harm.
Governance and senior oversight
Given the scale of the scheme, senior management should treat this as a conduct risk priority.
Oversight should include:
- Regular reporting on vulnerability outcomes
- Assurance over complaint handling quality
- Review of communications strategy
- Clear accountability under SMCR
The FCA has been clear that culture and leadership are central to how firms treat vulnerable customers.
