The UK’s leading collections and recoveries consultancy outlines key operational risks and readiness actions in response to the FCA’s proposed redress scheme, with insights from Group CEO Carlos Osorio and Head of Advisory Catherine Harris.
Navigating the FCA Motor Finance Redress Scheme: Major Implications for Debt Collection and Recoveries
The Financial Conduct Authority’s (FCA) consultation on a Motor Finance Consumer Redress Scheme marks one of the most significant regulatory interventions in UK financial services since the PPI scandal. With an estimated £8.2 billion in compensation and total costs potentially exceeding £11 billion, the scheme will have far-reaching implications for lenders, brokers, and anyone involved in debt collection and recoveries.
“The FCA’s proposed redress scheme doesn’t just address past practices—it will reshape how lenders, brokers, and collectors operate for years to come. The ripple effects across collections and recoveries teams will be substantial, and readiness will be key.”
— Carlos Osorio, Group CEO, Arum
Understanding the Scheme
The proposed scheme covers motor finance agreements between 6 April 2007 and 1 November 2024 where commission structures were not properly disclosed, resulting in customers overpaying. These agreements may now be deemed to have created an “unfair relationship” under the Consumer Credit Act 1974.
Under the proposal, lenders will be responsible for identifying affected customers, calculating redress, and managing repayments, while brokers must cooperate fully. However, the operational and financial burden will rest primarily with lenders.
What This Means for the Collections Industry
Collections and recoveries teams face significant operational and regulatory challenges, including:
- A sharp increase in customer complaints and disputes as consumers revisit historic agreements.
• A rise in vulnerability disclosures as customers cite hardship linked to unfair lending practices.
• The need to pause or reassess active collections where redress applies.
• Pressure on governance and compliance functions as the FCA monitors preparedness.
Steps Firms Should Take Now
Arum advises firms to act immediately in the following areas:
1. Audit and tag all in-scope agreements from 2007–2024 in CRM and collections systems.
2. Pause automated collections on disputed or complaint-linked accounts.
3. Form cross-functional working groups (collections, complaints, legal, IT, finance).
4. Enhance frontline training around redress communication and vulnerability handling.
5. Reinforce governance and reporting aligned with Consumer Duty principles.
“This is where preparedness will be won or lost. Firms must rapidly connect their data, complaints, and collections functions to create a single view of exposure and customer status. The challenge isn’t just in calculating redress—it’s ensuring that every operational process, third party, and agent knows how to act consistently when a case falls under the scheme. We’re working with several motor finance companies to map these changes now so they can lead from the front when the scheme becomes reality.”
— Catherine Harris, Head of Advisory, Arum
A Defining Moment for the Industry
“This is a defining moment for the collections and recoveries industry. Those who invest early in readiness, governance, and customer communication will not only protect their regulatory standing but also strengthen trust with consumers. At Arum, we’re already helping clients build redress playbooks and prepare their teams for the change ahead.”
— Carlos Osorio, Group CEO, Arum
Read the Full Blog
Learn more about the implications of the FCA Motor Finance Redress Scheme and how Arum is helping organisations prepare.
https://www.arum-global.com/insights/blog/navigating-the-fca-motor-finance-redress-scheme-will-affect-debt-collections-recoveries
