Early in March, the Financial Conduct Authority (FCA) issued a statement on their much-publicised car finance mis-selling investigation, which has been ongoing since January 2024.
The financial regulator is looking to introduce an industry-wide redress scheme, but how does this affect automotive finance firms? And how can lenders be proactive in preparing for the compliance communication demands the rulings will likely require?
For those who have been following the FCA’s investigation closely, the statement released by the industry watchdog on March 11th 2025 marked a significant step towards potential industry-wide compensation - and greater accountability for car finance lenders.
The investigation revealed that banks allegedly paid car dealers bonuses based on the interest rates they charged borrowers. The Court of Appeal ruled last October that car finance companies acted unlawfully by paying commissions to dealers without informing customers, which set the wheels in motion for recent events.
Under current rules, consumers must submit their own complaints to reclaim losses. However, the FCA wants to shift this responsibility to lenders, requiring them to identify affected borrowers. The FCA plans to consult on an industry-wide compensation scheme to ensure customers are reimbursed without needing to file individual claims.
With further updates expected within five weeks of The Supreme Court’s April 2025 decision, we could see millions of UK drivers landing compensation – a major undertaking for the automotive finance firms responsible for overseeing all related communications.
So, in summary:
The scheme will require firms to directly contact motorists who were mis-sold car finance through discretionary commission agreements, a task that will be challenging for many companies. This approach is in line with the FCA's Consumer Duty regulations, which require financial firms to act in the best interests of their customers. By ensuring that affected borrowers receive compensation without a complicated claims process, the scheme helps meet these obligations.
To achieve FCA compliance and meet borrower expectations during this somewhat confusing time, lenders will likely need to adopt a flexible strategy that reaches individuals effectively, on a person-by-person basis. Given the various demographics of those impacted, a mix of FCA-compliant postal notifications, email alerts, SMS updates, and potentially even telephone outreach will be essential to ensure no one is left unaware of their entitlement.
Clear, jargon-free messaging (in accessibly formats where appropriate) will also be crucial in maintaining trust and transparency throughout the process. With major lenders already setting aside billions to cover potential compensation, the FCA’s initiative aims to provide a streamlined, fair, and efficient resolution, without consumers having to battle claims firms or navigate lengthy disputes, as would typically be the case.
With the FCA expected to provide details on the industry-wide redress scheme by early June, automotive finance firms must start preparing for the significant communication challenge ahead. Millions of customers will need to be contacted quickly, clearly, and compliantly. Managing this mammoth outreach effectively will be key to maintaining compliance, protecting brand reputation, and delivering positive customer experiences.
Our vehicle finance specialist and CFH Business Development Manager, Michael Watson, suggests that access to a suite of adaptable multichannel solutions will be key to optimising workflows, guaranteeing precise and prompt communications:
“The FCA’s investigation into mis-sold discretionary commission agreements has taken a significant turn. Firms will need to manage a large-scale communications process across both digital and physical channels, and handling this efficiently is crucial. CFH’s multichannel solutions can help streamline the process, ensuring clear and timely communication”
CFH specialise in delivering secure, compliant, and impactful multichannel communications for the automotive finance industry. Whether through transactional print, hybrid mail, digital channels, or managed services, our solutions are designed to help firms reach customers efficiently while meeting consumer duty regulations. Our expertise provides borrowers with information they need to make informed decisions.
By partnering with CFH, lenders can take a proactive, strategic approach to this large-scale outreach. Our end-to-end communication solutions, including Docmail Hybrid Mail, CFH Managed and CFH Dotpost enable firms to manage both print and digital correspondence. This ensures every customer receives timely and compliant updates. Backed by industry-leading data security, accreditations, and best practices, we help businesses navigate this complex regulatory landscape with confidence.
Get in touch with one of our experts today to discover how tailored solutions can support your business through this crucial process, ensuring effective engagement, compliance, and customer satisfaction.
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