The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

As a consumer it’s hard not to have heard of the motor finance situation; from making headline news through to consumer champions raising awareness, leading to over 23 million consumers believing they may be entitled to a payout¹. This high level of engagement is a critical factor for lenders, particularly as the FCA estimates approximately 14 million motor finance agreements could qualify for the redress scheme, meaning a significant portion of the consumers currently believing they are entitled to a payout are likely to be ineligible.

The root of this challenge could lie with the consumer's difficulty in finding or recalling exact details for agreements taken out up to 19 years ago. How many of us can honestly say they still have the paperwork from a car they bought in 2007? 

Ignoring the lessons of PPI, particularly around the overwhelming volume of enquiries and the resultant administrative cost could be a significant risk to a lender's financial and reputational health, especially with the likely addition of much greater onus on lenders to find affected customers.

Redress reality: Current challenges for lenders

The complexity of the scheme means the redress process is fraught with challenges. Lenders potentially face a daunting combination of data gaps, non-compliance risks, and fraud threats:

• Missing historical data: The proposed scheme is likely to cover agreements dating back as far as April 2007. This extensive look-back period presents an inherent challenge, as some lenders may find their records incomplete or simply no longer held for this duration. This poses a significant operational hurdle to achieving the necessary level of data certainty required for the currently proposed redress process.
• Outdated contact information: Lenders are likely to have a FCA requirement to proactively contact eligible customers. However, data suggests this could be a massive undertaking: up to 47% of consumers who took out motor finance in 2007 are no longer resident at the same address², risking failed communications and non-compliance to the likely requirement on firms to “do what they can to track down consumers” ³.
• Acute threat of fraud: A scheme this large and complex is a magnet for fraud, an acute threat that must be actively mitigated to ensure payments end up in the hands of the correct individual and meet regulatory requirements.

Strategic imperatives for redress readiness

To confidently manage the operational and compliance aspects of the redress process, lenders need to focus on three core strategic imperatives:

1. Plug historical data gaps: Lenders need to consider how they will plug any historical data gaps they might have.      This can be done by leveraging comprehensive, historic motor finance information from companies like Equifax. This could help them assess customer eligibility and calculate redress across the proposed look-back period.
2. Establish a robust customer tracing strategy: With a significant proportion of consumers likely to have moved, the onus is likely to be on lenders to find and contact them. A robust tracing strategy should encompass capabilities to reaffirm old addresses and provide new contact information. Leveraging up-to-date digital contact methods - such as email and mobile phone number - could also support more efficient customer engagement and help      reduce administrative costs and wasted communication efforts.
3. Deploy an effective ID verification strategy to mitigate fraud: To mitigate the inevitable threat of fraud, firms need to consider how they will verify a consumer’s identity and ensure payments go to the legitimate claimant. 

Conclusion

The motor finance redress scheme is set to be a definitive test of operational resilience for the sector. Lenders need to prepare now by eliminating data gaps, establishing robust tracing capabilities, and mitigating fraud, to reduce operational costs and deliver a positive consumer experience ahead of the anticipated announcement from the FCA in early 2026.

Sources:

1 Slater & Gordon poll Jun 2025.

2 Equifax 2025: Based on a sample of 80k motor finance accounts per origination year

3 FCA, Motor finance consumer redress consultation Paper CP25/27, Section 6.6