How can Motor Finance firms prepare for a redress scheme?

The Financial Conduct Authority (FCA) has confirmed that it will consult on a redress scheme for discretionary commission arrangements (DCAs) in motor finance. This marks a pivotal moment for firms across the sector that demands a clear strategy, early preparation and strong governance. Poor planning, weak controls, and reactive execution can lead to increased costs, reputational damage, and intense regulatory scrutiny.

At BDO, we've supported financial institutions for over 20 years in designing and delivering complex remediation programmes. Here are the key areas firms should focus on now to ensure operational readiness.
 

What are the key things firms should consider for programme planning and governance?

Strong governance is the foundation of any successful redress programme. Firms should:

• Establish a dedicated programme team with clear oversight and responsibilities.
• Ensure direct reporting into senior leadership.
• Develop a proactive regulatory engagement strategy, anticipate FCA expectations and prepare to evidence good outcomes.
• Build robust reporting frameworks and quality assurance controls from day one. These must be watertight and capable of withstanding regulatory challenge.

 

What steps can firms take to manage issues with customer data?

Managing customer data is likely to be one of the most significant challenges firms face as part of a potential commission redress scheme. The FCA is consulting on the expectation that firms consider agreements dating back to 2007. However, many businesses won't have complete records from that period due to system changes, data retention policies, or legacy issues. To address this you can:

• Conduct a data discovery exercise - map what you have, where it sits, and what’s missing.
• Engage your supply chain to understand what records they hold.
• Incorporate complaints data and explore external sources such as credit reference agencies or public records.
• Document gaps and assumptions and use sampling or statistical modelling where needed.
• Work with legal and compliance teams to agree on a GDPR-compliant and defensible approach.

 

You don't need perfect data but you do need a clear, auditable rationale for how you're using what you have.
 

Where can firms start with segmenting customer data?

Effective segmentation is critical to delivering fair outcomes. Firms should:

• Distinguish between DCA and non-DCA cases.
• Assess commission fairness and identify vulnerable or unsophisticated customers.
• Account for deceased customers and those who’ve moved.
• Consider the FCA's position on de-minimis thresholds to avoid disproportionate remediation.

 

Developing segmentation models that balance fairness, feasibility, and regulatory expectations is complex and external support may be beneficial here.
 

How might firms develop their customer communication strategy for a redress programme?

Your communication strategy must be clear, empathetic, and compliant. Key considerations include:

• Designing communications that are easy to understand and tailored to different customer groups.
• Ensuring legitimacy to avoid confusion with scams.
• Setting up mailing house operations and defining contact strategies.
• Supporting vulnerable customers and managing estates.
• Implementing a robust tracing and gone-away strategy.
• Preparing for social media monitoring, query management, complaints handling, and CMC engagement.

 

How can firms ensure a compliant approach to redress?

Redress must be fair, evidence-based, and aligned with the FCA's framework. Firms will need to:

• Interpret the regulatory framework and apply it to their specific business circumstances.
• Design remediation processes and build calculators that reflect the FCA's position on redress payments and interest.
• Pilot scenarios and ensure terms and conditions support consistent outcomes.
• Implement quality control and customer outcome testing.

 

What resources might firms need for a redress programme?

Even for firms with a small customer population, it is likely that additional capacity will be needed. Firms may also lack experience of running such a remediation or redress programme before. Questions to consider:

• Do you have the capacity and skills in-house?
• Will you need external support or technology solutions?
• Can existing teams be backfilled to maintain BAU?

 

Automation and workflow tools can help scale your response - but they must be auditable and ready for review by the regulator.
 

How can we help?

Managing any redress or remediation programme is complex, even where guidance may appear straightforward. We have over 20 years of experience helping firms manage some of the largest and most challenging programmes in financial services. If you require help with programme design, operational planning, resourcing, delivery or assurance please get in touch today with Ross Swan.