Where Things Stand
The Supreme Court's October 2024 ruling in Johnson v FirstRand Bank and the associated judgments in Hopcraft and Wrench established that discretionary commission arrangements (DCAs) in motor finance were unlawful under common law. The FCA's subsequent review and proposed redress scheme have moved the issue from legal uncertainty to near-certainty of industry-wide remediation.
As of April 2026, the FCA has confirmed the outline of a consumer redress scheme. Firms that wrote motor finance with DCA structures before the January 2021 ban are in scope. The scale of the liability across the industry is estimated at £16–£30 billion by various analysts. For individual dealer groups, the implications depend on the volume of affected agreements and the structure of their lender relationships.
This article is for dealers and dealer group finance directors who need a clear picture of their exposure and the practical steps to take now.
What the DCA Redress Scheme Actually Covers
The redress scheme applies to regulated motor finance agreements where a discretionary commission arrangement existed between the lender and the dealer (or broker). Specifically:
- The dealer had discretion to set the interest rate within a lender-defined range
- The dealer's commission was linked to the interest rate set (higher rate = higher commission)
- The customer was not adequately disclosed this arrangement
The key financial harm is that customers paid a higher rate of interest than they would have under a non-discretionary arrangement. The redress calculation is the difference between the rate charged and a "fair" reference rate, applied to the outstanding balance over the life of the agreement.
Important scoping points:
- The DCA ban took effect January 28, 2021. Agreements after that date are out of scope.
- Flat-fee commission arrangements (where the dealer's commission did not vary with the rate) are not in scope for the DCA redress scheme, though they may face separate FCA scrutiny on disclosure grounds.
- Hire purchase and personal contract purchase (PCP) agreements are both in scope if DCA applied.
Who Bears the Liability?
The legal liability sits primarily with the lender, not the dealer. The lender-dealer relationship created the DCA structure; the lender received the application, made the credit decision, and entered the credit agreement with the consumer.
However, dealers are not operationally insulated from this. Several practical complications arise:
1. Indemnity clauses in dealer agreements. Many dealer-lender agreements from the pre-2021 period contain indemnity clauses requiring the dealer to indemnify the lender for claims arising from the dealer's conduct. Whether those clauses capture DCA-related liability is a live legal question that varies by agreement. If your dealer agreement has a broad indemnity clause, you need legal advice on your specific exposure before the redress scheme goes live.
2. Customer relationship and reputational risk. Even where lenders bear the financial liability, redress letters will reference the finance product sold at your dealership. Customers who receive redress payments may associate the poor outcome with you, not the lender. Managing that relationship proactively is worth considering.
3. Operational burden of the complaints process. Prior to the formal redress scheme activating, dealers may receive complaints routed through lenders or directly from claims management companies. Staff training on how to handle and redirect these correctly matters.
What the Timeline Looks Like
The FCA's proposed timeline for the redress scheme:
- May 2026: FCA publishes final redress scheme rules (expected)
- Q3 2026: Lenders begin contacting affected customers proactively (the scheme is designed to be proactive — lenders identify affected customers, not the other way round)
- Q4 2026 – 2027: Redress payments issued for the majority of in-scope agreements
- Ongoing: Complaints handling and appeals process
The proactive approach is significant. It removes the claims management company (CMC) as a necessary intermediary, which should reduce the overall friction of the process. It also means the volume of customer contacts will be substantial and will hit lenders — and indirectly dealers — over a compressed period.
What Dealers Should Do Now
1. Map your DCA exposure. Identify which lenders you worked with pre-January 2021, and which of those relationships involved DCA structures. Your F&I records from that period should contain this information. If records are incomplete, contact your lenders directly — they will be mapping this themselves.
2. Review your dealer-lender agreements. Specifically, identify any indemnity or contribution clauses that could expose you to lender recovery actions. Get legal advice if the language is broad.
3. Train your F&I and customer-facing staff. When redress letters land — and they will — your team needs to be able to respond calmly and correctly. Redirecting customers to their lender's complaints process (not making independent commitments) is the key message.
4. Review your current commission structures. The FCA's attention on motor finance extends beyond DCAs. Flat-fee arrangements and their disclosure are under review. If your current commission disclosure practices are not robust, address them now before the next regulatory cycle.
5. Do not engage CMCs on your dealer's behalf. Claims management companies operating in the motor finance space have no special standing in the redress process. They exist to extract fees from the process, not to add value for dealers. Their involvement in communications between your dealership and lenders adds complexity and cost without benefit.
The Bottom Line
The DCA redress scheme is not a dealer liability event in the primary sense — the financial burden sits with lenders. But operational exposure, indemnity risk, and reputational considerations make it a priority for any dealer group that was active in the pre-2021 motor finance market.
The dealers who navigate this well are those who have mapped their exposure clearly, reviewed their legal position on indemnity, and prepared their teams for the customer communication volume that is coming.
The dealers who get caught out are those who assume that because they are not the named defendant, they have nothing to manage.
Charles leads FCA Motor Finance regulatory advisory at Aicura Consulting, specialising in redress scheme navigation, dealer exposure assessment, and F&I compliance frameworks.