"PPI on wheels" - FCA update

The FCA's announcement

On Tuesday 11 March, the FCA announced that it was no longer planning in May 2025 to set out the next steps in its review of discretionary commission arrangements in the motor finance industry. Depending on the outcome of the Supreme Court’s decision in Johnson, Wrench and Hopcraft (which is due to be heard on 1–3 April 2025) the FCA announced that it may instead move to consult on an industry-wide redress scheme. 

The FCA will confirm within six weeks of the Supreme Court’s decision in Johnson if it's proposing a redress scheme, and how that will be progressed if so.

In the meantime, the FCA has been granted permission to intervene in the Johnson case, which will allow it to make written and oral submissions to the Supreme Court next month. The FCA’s submissions are due to be published on the first day of the hearing, 1 April.

What's a redress scheme?

The FCA has confirmed that, if it concludes following the Supreme Court decision, that motor finance customers have lost out from widespread failings by firms, it is likely to consult on an industry-wide redress scheme. 

An industry-wide consumer redress scheme would require firms to conduct reviews of whether their customers have lost out and, if they have, offer appropriate compensation. This would provide consumers with an easier route to redress than pursuing a complaint or claim via, for example, a claims management company, and would also enable them to retain all the compensation offered. A redress scheme may also be a more efficient mechanism for firms to pay compensation.

We can expect the FCA to provide further guidance if and when a scheme is announced.

What could the financial impact be?

Firms will need to continue to ensure that they have the financial resources to cover the cost of dealing with customer complaints and queries in accordance with the FCA’s Threshold Conditions and Principles for Businesses. 

Prudent firms will also be making arrangements to set aside funds for potential compensation payments - it has been reported that the scandal could cost lenders £44 billion. Indeed, Close Brothers, one of the appellants in the Johnson case, reportedly expects to set aside up to £165 million in the first half of its financial year to cover the costs.

The Guardian has also reported that Santander UK has set aside £295 million and Lloyds has set aside £700 million in anticipation of the payouts.

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