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Published: 1 April 2026 | Category: Motor Trade | Audience: Car dealers, fleet operators, finance managers, dealer group executives, manufacturer network managers
The FCA's publication of Policy Statement PS26/3 on 30 March 2026 confirmed what much of the industry had anticipated since the Supreme Court's ruling last September: a mandatory, industry-wide redress scheme will be launched in October 2026 to compensate car buyers who paid inflated interest rates as a result of discretionary commission arrangements (DCAs). The total bill across the industry is estimated at £9.1 billion.
For dealers and motor trade operators, the immediate reaction may be one of relief: the scheme is primarily a lender liability, and PS26/3 makes clear that most dealers will not be writing cheques to their customers. But the details matter. PS26/3 introduces specific obligations for dealers who acted as credit brokers during the relevant period, reshapes the competitive landscape for dealer finance, and arrives at a moment when the UK new car market is recording volumes not seen in over two decades.
This article cuts through the regulatory language to explain what PS26/3 actually means for the trade.
The Core Question for Dealers: Am I a Lender or a Broker?
The distinction matters enormously under PS26/3. The redress obligation falls on lenders — the finance companies that advanced the money. Brokers — which includes the vast majority of car dealers who introduced customers to a finance lender — face a more limited set of obligations, primarily around record-keeping and information provision.
Most franchised dealers, most independent used car retailers, and most fleet operators who arranged finance through a third-party lender (whether a bank, a specialist motor finance company, or a manufacturer captive) were acting as brokers in this relationship. They did not take the credit risk; they introduced the customer and received a commission.
If you were a broker, your primary obligations under PS26/3 are:
- Maintain records of any DCA-affected finance introductions made between January 2007 and January 2021, for ten years from the scheme start date.
- Respond to information requests from the lender within 30 days when the lender contacts you for data to process a consumer's redress claim.
- Do not obstruct any customer seeking to make a claim.
The financial liability — the actual redress payment — sits with the lender. You will not be asked to pay your customers compensation directly.
The Manufacturer Captive Exception: BMW, VW, Ford, Toyota Not in Scope
The single most important provision in PS26/3 for the franchised dealer network is the explicit exclusion of manufacturer captive finance companies from the scheme's scope.
The FCA's rationale is straightforward: where a finance company operates under a manufacturer's brand — BMW Financial Services, Volkswagen Financial Services, Mercedes-Benz Financial Services, Ford Credit, Toyota Financial Services — the consumer was made aware (or should reasonably have been aware) of the commercial relationship between the dealer, the manufacturer, and the finance provider. The manufacturer's name was on the agreement, the promotional materials, and the point-of-sale documentation. The opacity that gave rise to the DCA scandal was materially reduced in these arrangements.
PS26/3 uses the test of "visible brand association" to determine whether captive exclusion applies. The requirements are that:
- The finance company's name or brand includes a direct reference to the vehicle manufacturer.
- The promotional materials used at point of sale identified the finance company as associated with the manufacturer.
- The lender's name on the finance agreement was identifiably connected to the vehicle brand.
For franchised dealers selling vehicles under manufacturer brands with dedicated financial services arms, this exclusion is significant. BMW, MINI, Volkswagen Group (VW, Audi, SEAT, Skoda, Porsche), Mercedes-Benz, Ford, Toyota, and most other major manufacturer finance operations are outside the scope of the scheme.
This does not mean those arrangements were above reproach. It means that for the purposes of this particular scheme, the FCA has determined that the consumer protection case for mandatory redress does not apply with the same force as it does to arms-length lenders where the commission conflict was entirely hidden.
Which Finance Arrangements Are in Scope?
The scheme captures agreements where all of the following apply:
- The agreement was a regulated consumer credit agreement under the Consumer Credit Act 1974.
- The finance was provided between 1 January 2007 and 28 January 2021 (the date on which the FCA banned DCAs across all consumer credit).
- The lender used a discretionary commission arrangement that allowed the dealer to set or influence the interest rate charged to the consumer.
- The consumer's actual APR was above 17% (or above 21% for higher-risk segments).
Arrangements that typically fall outside scope include:
- Agreements under 0% finance promotions (no DCA possible where rate is fixed at zero).
- Agreements funded by manufacturer captives with visible brand association.
- Business-purpose finance (commercial vehicle finance, fleet agreements above the consumer credit threshold).
- Agreements where the commission was a flat fee unconnected to the interest rate charged.
- HP and PCP agreements where the rate was fixed at origination without dealer influence.
For most franchise dealer operations, the agreements most likely to be in scope are used car sales funded by third-party lenders through standard HP or PCP arrangements, and independent dealer sales funded through specialist motor finance companies such as Zopa, Moneybarn, and similar.
What Dealers Need to Do Now
Check Your Records
The most pressing practical task for dealers who acted as brokers for regulated consumer credit between 2007 and 2021 is to locate and secure any records relating to those introductions. PS26/3 requires brokers to maintain records for ten years from the scheme start date (October 2026), which means you need records accessible until at least October 2036.
For most dealerships, the relevant records will include:
- Finance introduction registers or dealer management system records.
- Copies of consumer credit agreements or at minimum the agreement reference numbers.
- Commission schedules and rate cards applicable during the relevant period.
- Any correspondence relating to DCA arrangements with lenders.
Many dealerships changed ownership, changed franchise, or changed DMS systems during the 2007-2021 period. If records are incomplete, the PS26/3 guidance provides that a good-faith certification of unavailability — supported by reasonable efforts to reconstruct from available sources — will not be treated as non-compliance.
Respond to Lender Requests Promptly
When lenders begin processing customer claims in October 2026, they will contact dealers for information needed to verify the commission arrangement and calculate the redress due. You have 30 days to respond. Failure to respond is a regulatory breach enforceable by the FCA.
Designate a compliance contact at your dealership or dealer group who is responsible for handling these requests. If your business uses a compliance consultancy or industry trade body support, brief them now on the record location and contact process.
Brief Your Finance Team
Your F&I (Finance and Insurance) team will be the first point of contact for customers who have heard about the scheme and come into the showroom with questions. Those conversations need to be handled carefully: you should confirm that the scheme exists and that customers with qualifying agreements will be contacted by their lender, but you should not be providing individual redress calculations or speculating about entitlements.
The FCA has confirmed that customers do not need to engage a claims management company to access redress. If customers ask, you can point them to the FCA's consumer guidance at fca.org.uk/motorfinance — this is helpful customer service and aligns with your regulatory obligations.
The Market Context: New Car Sales at a 22-Year High
The scheme announcement lands at an unusual moment for the UK motor market. New car registrations in 2025 reached their highest level since 2003, with SMMT data confirming approximately 1.92 million units registered in the calendar year — a recovery driven by fleet replacement cycles, EV adoption incentives, and the resumption of manufacturer supply chains normalised after the semiconductor shortage years.
Consumer finance continues to underpin the majority of new car sales. FLA (Finance & Leasing Association) data for 2025 shows that £41 billion of motor finance was advanced in the UK market, a year-on-year increase of approximately 6%. PCP (personal contract purchase) remains the dominant product, accounting for around 80% of consumer new car finance.
PS26/3 applies to legacy agreements. It does not retrospectively apply to agreements originated after January 2021 — which is when the FCA banned DCAs and removed the mechanism that the scheme is designed to redress. Finance agreements originated since February 2021 use fixed flat-fee commission structures, which are transparent and disclosed to consumers at point of sale.
The implication for dealers is straightforward: the finance arrangements you are using today are not subject to this scheme. New business written from February 2021 onwards is structurally different from the agreements at issue.
Implications for Dealer Finance Economics
The scheme does have some indirect implications for dealer economics, however.
Lender capacity: Lenders processing large volumes of redress claims through 2026-2028 will have reduced operational bandwidth for new business development, dealer network management, and product innovation. Dealers who rely heavily on a single lender panel may find that their lender partner is slower to respond to new business opportunities or to support marketing activity during the scheme period.
Consumer confidence: There is a reasonable case that the FCA's announcement — which validates that many consumers were indeed overcharged — will make some buyers more cautious about dealer-arranged finance and more inclined to arrange finance independently through banks or price comparison sites. Dealers who can demonstrate transparent, competitive pricing on finance will be better placed than those who have relied on rate margin as a revenue stream.
Manufacturer advantage deepens: The captive exemption in PS26/3 further strengthens the competitive position of manufacturer financial services operations relative to independent lenders. BMW Financial Services and Volkswagen Financial Services can continue marketing without the cloud of scheme participation; their independent lender competitors face several years of elevated operational costs and reputational management. This may accelerate the trend towards manufacturer finance penetration in the franchised dealer sector.
The Road Ahead for Dealer Finance
PS26/3 closes a chapter that opened when the FCA began scrutinising DCA arrangements in 2019. For dealers who operated in good faith within the regulatory framework that existed at the time — and the vast majority did — the scheme represents the industry working through a structural problem that the regulator itself permitted for nearly two decades.
The lesson for dealer finance operations is not that finance is too risky to offer but that transparency and consumer-aligned pricing are now non-negotiable requirements. The FCA's Consumer Duty, which came into force in 2023, sets a higher standard for evidencing customer outcomes across all product lines — including finance. Dealers who treat their F&I operation as a profit centre at the expense of customer value are exposed to the next round of regulatory scrutiny, in whatever form that takes.
The market is healthy, finance volumes are at record levels, and the captive exemption confirms that manufacturer-branded finance arrangements are structurally sound. The question for dealer principals and finance directors is how to build a finance offer that can withstand scrutiny of the kind that PS26/3 has applied to the previous generation of arrangements.
Sources: FCA Policy Statement PS26/3 (30 March 2026); FCA Consultation Paper CP25/27; Johnson v FirstRand Bank Ltd & Others [2025] UKSC 33; SMMT New Car Registrations 2025; Finance & Leasing Association Motor Finance Statistics 2025; FCA Consumer Duty (PS22/9).
This article provides general regulatory commentary for motor trade professionals and does not constitute legal or compliance advice for specific arrangements.
Originally published on MotorRedress
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