“PPI on wheels”: The FCA provides an update before the Supreme Court decision

This article provides an overview of the update from the Financial Conduct Authority (FCA) on its ongoing review into Discretionary Commission Arrangements (DCAs) in the motor finance industry. It outlines the factors the FCA will consider if it decides that a UK-wide consumer redress scheme needs to be implemented.

Supreme Court decision will be key

The FCA has reaffirmed that it will announce its decision on whether to proceed with a redress scheme and a potential consultation within six weeks of the Supreme Court’s ruling in the pivotal case of Johnson, Wrench and Hopcraft, which was heard in April 2025. The judgment is expected in July.

The FCA was previously granted permission to intervene in the case and has made written and oral submissions. The outcome will be central to determining whether widespread consumer harm occurred due to non-disclosure of commission arrangements.

Guiding principles and scope for a potential redress scheme

In its statement, the FCA outlined seven key principles which would guide its approach:

1. Comprehensiveness: Covering a wide range of complaints to avoid court proceedings for individual consumers.
2. Fairness: Ensuring the approaches to determining breaches and calculating redress are fair to consumers and firms.
3. Certainty: Providing consumers and firms with finality.
4. Simplicity and cost effectiveness: Creating an easily accessible, cost-proportionate approach, without the need for a claims management company or a law firm.
5. Timeliness: Resolving claims within a reasonable timeframe.
6. Transparency: Providing clear explanations of decisions and making the data on the scheme’s progress publicly available.
7. Market integrity: Supporting the ongoing, long-term availability of high quality, competitively priced motor finance.

One of the central questions the FCA is weighing is whether any redress scheme should be “opt-in” – requiring consumers to register their claims by a certain date – or “opt-out”, which would automatically include affected customers unless they chose to opt-out. The former might be less accessible to consumers, while the latter may significantly increase the number of potential claims and the financial exposure for motor finance providers.

Managing expectations

While reaffirming that the outcome of the Supreme Court's judgment cannot be predicted, the FCA has also cautioned against inflated expectations regarding redress rates. In the update, the FCA warns that it may take a different approach to the Financial Ombudsman.

What happens next?

The industry is now in a holding pattern until the Supreme Court delivers its judgment. Major lenders and industry actors have already begun provisioning for potential liabilities. Once the decision is known, the FCA will confirm within six weeks whether it intends to proceed with a redress scheme and its detailed proposals for how a redress scheme would work in practice.

In the meantime, any industry actor should be considering how best to prepare – see our previous article.