Source: Sharecast
The regulator said that if it proceeded with the scheme, it expected to publish final rules in late March.
While a final decision had not yet been made, the FCA said it was outlining key operational details in advance to help lenders prepare and ensure affected consumers receive any compensation promptly.
Under current plans, the scheme would include a three-month implementation period for most cases, extending to up to five months for older finance agreements.
Firms would be permitted to start processing claims earlier if they were ready to do so.
The FCA said it also intended to streamline the compensation process for both consumers and lenders.
Customers who had already submitted complaints before the scheme started would no longer be asked whether they wished to opt out.
Instead, within three months of the end of the implementation period, lenders would notify them if they are owed compensation and how much they were due.
Consumers would be able to accept redress offers immediately rather than waiting for a final determination.
In addition, firms would not be required to contact customers via recorded delivery, with the regulator proposing that lenders use a range of communication channels, subject to safeguards designed to prevent fraud.
The FCA said that even with the implementation period in place, the streamlined approach would mean millions of customers could receive compensation during 2026.
The regulator reiterated its advice that anyone concerned they were not informed about commission arrangements linked to their motor finance agreement should submit a complaint now, as doing so could help them receive compensation sooner.
It also warned consumers that using claims management companies or law firms could reduce any payout by more than 30%.
The FCA said it had taken enforcement action against poor practices among FCA-regulated claims management companies, with more than 800 misleading adverts removed or amended since January 2024.
It said it had also intervened with five firms found to be causing consumer harm, including requiring two to reduce exit fees and four to stop taking on new clients until they demonstrated compliance with regulatory rules.
Many consumer groups and industry participants responding to the consultation supported the proposed changes, the FCA said, adding that the measures would help ensure the compensation process remains efficient while maintaining a well-functioning motor finance market for millions of borrowers.
Reporting by Josh White for Sharecast.com.
