PCP Claims: March 2026 Market Update

Background and Historical Development

As outlined in earlier briefings, the PCP claims market arises from historic motor finance agreements where brokers received commission from lenders.

In many cases, these commissions were either not disclosed to consumers or were disclosed inadequately. In particular, Discretionary Commission Arrangements (DCAs) allowed brokers to increase interest rates and receive higher commission as a result.

Key milestones leading to the current position include:

January 2021
The FCA banned DCAs after concluding that the structure created a conflict of interest and led to consumers paying more for credit.

2023-2024
A large number of complaints were submitted to lenders and the Financial Ombudsman Service (FOS), leading to regulatory scrutiny and litigation.

October 2024 – Court of Appeal decision
In Johnson, Wrench and Hopcraft, the Court of Appeal held that undisclosed commission arrangements could create an unfair relationship under the Consumer Credit Act 1974.

This significantly broadened the potential scope of claims.

August 2025 – Supreme Court judgment
The Supreme Court partially overturned the Court of Appeal’s reasoning but confirmed, in Johnson, that an undisclosed commission could contribute to an unfair relationship under section 140A of the Consumer Credit Act 1974 on the facts of that case.

While the ruling limited some of the broader legal arguments, it preserved a basis for certain commission-related unfair relationship claims.

October 2025 – FCA consultation
Following the judgment, the FCA announced its intention to introduce a market-wide redress scheme to compensate consumers affected by historic commission arrangements.

The consultation suggested:

• approximately 14 million agreements could fall within scope
• estimated lender exposure of around £8.2bn in compensation, with broader market cost estimates reaching higher levels
• average redress of around £700 per agreement

At that stage, however, the detailed mechanics and implementation timetable remained uncertain.

How Definitive Is The Current Information?

Although the FCA’s latest statement provides stronger guidance on the direction of travel, several elements of the scheme are still subject to confirmation.
The current position should therefore be treated as highly indicative but not yet final.

Historically, large-scale redress schemes such as PPI have undergone further refinement between consultation and final implementation.

As a result, the key structural elements now appear unlikely to change significantly, but operational details may still evolve.

Impact on Previous Assumptions

The latest update largely confirms rather than materially changes the market outlook described in earlier briefings. However, it does refine expectations in several areas.

1. Greater certainty that a redress scheme will proceed
Earlier commentary left open the possibility that the FCA might scale back its intervention depending on consultation feedback.

The latest statement strongly suggests that the regulator is now committed to introducing a formal scheme.

This significantly reduces regulatory uncertainty.

2. Timing remains broadly consistent with earlier expectations
Previous estimates anticipated that the scheme would be finalised during 2026, with compensation processing beginning thereafter.

The latest update appears consistent with that timeframe. However, the FCA has now indicated that final scheme rules are expected by the end of March 2026. After that, firms will be given time to implement the scheme.

3. Litigation is unlikely to be the primary route for resolution
Earlier assumptions allowed for the possibility that large volumes of claims might proceed through litigation.

The regulator’s approach suggests that most claims will instead be resolved through the FCA scheme, with litigation remaining limited to:

• cases outside the scope of the scheme,
• disputes over redress calculations,
• or higher-value claims.

Outstanding Issues Still To Be Confirmed

Several important aspects of the scheme remain unresolved. These include:

Scope of claims
While discretionary commission agreements are clearly within scope, it remains uncertain whether all non-disclosed or partially disclosed commission structures will be covered by the redress scheme or whether some categories will remain outside the scheme.

Calculation of compensation
The FCA has indicated that compensation will likely be formula-based, but the exact calculation methodology has not yet been confirmed. Questions remain around:

• how excess interest will be calculated
• whether additional compensation will be applied
• whether statutory interest will be included.

Consumer participation model
It is not yet clear whether the scheme will operate on an opt-in or opt-out basis.
This could materially affect claim volumes and operational delivery.

Implementation timetable
Although the FCA has indicated that the scheme will be introduced after final rules are published, the precise timeline for:

• lender reviews
• consumer notifications
• and compensation payments

has not yet been confirmed. has not yet been confirmed. The latest FCA update does, however, suggest a likely implementation period of three months, with up to five months for older agreements.

Expected Next Milestones

Based on the FCA’s latest communications and the consultation process to date, the likely sequence of events is:

2026 (expected)
Publication of final FCA rules and guidance for the redress scheme.

Following the publication of the final rules
Lenders are expected to be given a period to prepare systems and identify affected agreements.

Implementation phase
Consumer compensation process begins once operational frameworks are in place, with the FCA indicating that millions could receive compensation during 2026.

Conclusion

The latest FCA update strengthens the overall thesis previously outlined in earlier briefings.

In particular, it reinforces that:

• the regulator intends to implement a structured redress scheme,
• the legal basis for claims has been clarified by the Supreme Court,
• and the market is now moving from legal uncertainty toward regulatory execution.

While certain operational details remain unresolved, the overall framework for resolving PCP commission claims is now significantly clearer than it was even six months ago.

Further updates will be provided once the FCA publishes final scheme rules.