The FCA's £700 Motor Finance Redress: How It's Made, Where It Underpays, and How to Challenge Quantum
The FCA's consultation CP25/27 (Oct 2025) extends redress to all broker-sold motor-finance agreements from 6 April 2007 to 1 Nov 2024. It publicly frames an average payout of "around £700 per agreement" and an industry cost of ~£11bn (c. £8.2bn compensation + £2.8bn admin) (§1.28–1.32).
The core question (and what changed)
The FCA's £700 average isn't guesswork
The new paper also shows the FCA has drawn on very large datasets — not a token sample. They collated agreement-level data from 34 lenders for 31.86m agreements, filtered to 24.29m with commission (11.43m DCA; 12.22m non-DCA; 647,728 with commission but missing DCA flag) (§3.4–3.5). They also reviewed ~4,041 casefiles, including 3,263 DCA files and 599 non-DCA files across up to 89% of the market (§3.3).

Key figures: 32.5m agreements; 14.2m 'unfair' (43.6%) — §§1.3, 1.22, 1.30–1.32
Datasets: 31.86m agreements; 4,041 files reviewed (§§3.3–3.5)
So the £700 isn't guesswork. But it is still the output of policy choices and averaging shortcuts that depress individual awards. This deck explains how the £700 is made, where it underpays, and how to challenge quantum lawfully for clients.
How the scheme pays: the three remedies that produce £700
The FCA uses three calculation routes (§§1.25–1.29):
Commission Repayment (Johnson-type)
Repay all commission paid to/for the broker plus simple interest at Bank Rate +1% (weighted 2.09%) from payment date. Reserved for cases "very similar to Johnson": commission ≥50% of Total Cost of Credit and ≥22.5% of the loan and a meaningful tie (§1.26).
APR Adjustment (loss model)
Convert original APR to a "market-adjusted APR" by applying a flat 17% relative reduction (e.g., 10.0% → 8.3%) and refund the per-instalment overcharge; add simple interest at 2.09% (§1.27–1.29).
Hybrid (the default)
Pay the average of Commission Repayment and APR Adjustment and, if APR-only is higher, use APR (§1.28).
Internal tables behind §1.30 give typical means (including the FCA's low simple interest): in DCA cases APR ≈ £421, Commission ≈ £910, Hybrid ≈ £666. That centre of gravity is what the market sees as "£700".
Worked example: 10% APR → 8.3%; APR remedy c. £450; Commission c. £950; Hybrid c. £700
What the FCA actually found: breadth and breach rates
The FCA's factual reviews are significant (§§3.3–3.7):
What they looked at
  • Scale: 4,041 files reviewed; 34 lenders' datasets spanning 2007–2024 (later extended to Mar 2025)
  • Coverage: 31.86m agreements analysed; 24.29m with commission, of which 11.43m DCA and 12.22m non-DCA; 647,728 with commission but missing type (§3.4–3.5)
What they found
  • DCA disclosure: In 3,333 DCA files, there were zero files where customers were told commission "would" be paid and given information about the arrangement; 60% showed only "may/would" language; 40% had insufficient evidence — treated as likely no disclosure (§3.8)
  • Non-DCA commission amount: In 599 non-DCA files, the amount of commission was disclosed in 4%; 79% not disclosed; 17% data unavailable (§3.11)
  • Tied/ROFR: In DCA and non-DCA cohorts, ROFR/tie features appeared and were largely undisclosed (§§3.13–3.16)
From this, the FCA models indicators of unfairness at market level: inadequate DCA disclosure 37%, high commission 9.5%, tied arrangements 10.5% — which they roll up (with overlap) to an overall redress due in 43.6% of cases (~14.2m agreements) (§§3.22–3.24; §1.22).

What this means: the FCA's liability finding is strong. The debate is about quantum, not whether detriment happened.
Note: Overlaps in indicators produce the 43.6% overall figure
The £700 arithmetic: where each pound comes from
For a typical £10,000 PCP, 48 months, 10% APR, the FCA's 17% haircut gives a market-adjusted APR of 8.3%. The monthly gap is ~£7.7–£8.1, producing an overcharge c. £388–£405 before interest. Applying 2.09% simple interest (their weighted rate) lifts the APR remedy to ≈ £420–£460.
Typical commissions in DCA-era files (inc. volume/ancillary elements) run £800–£1,100; at 2.09% simple interest, the Commission remedy sits ≈ £900–£1,050.
The Hybrid is the mean of these two: ≈ £650–£730 — the "around £700" stated at §1.30.
~£450
APR remedy
After 17% haircut and 2.09% interest
~£950
Commission remedy
Full repayment plus 2.09% interest
~£700
Hybrid (average)
The FCA's stated typical outcome
This is arithmetic, not individualised restitution: the 17% APR proxy and the 2.09% interest are policy parameters. Change either and the average moves materially.
Where the model compresses value(and by how much)
APR gap is larger than 17% in many cohorts
The FCA's own econometrics (2019–2021) found DCA APRs "typically 20–24% higher" than flat-fee loans (§3.28). They then round this to a 17% proxy for the whole period (§3.29). In sub-prime/used-car windows (2013–2019), broker floor-rates and securitisation tapes suggest 25–40% relative uplifts were common. Moving the haircut 17%→25% raises typical APR remedy by ~£120–£170 per file (on the £10k/48m example).
Interest is suppressed at 2.09%
Courts/FOS frequently award 8% simple. Pure proportionality (8 ÷ 2.09 ≈ 3.8x) means interest on the overcharge is 3–4× lower in the scheme. Depending on timing, this often adds £50–£200+ per agreement if challenged.
Hybrid averaging halves high-value cases
Section 140A CCA lets a court remove the lender's advantage; it does not require averaging a fairness remedy with a loss proxy. Taking the higher-of (Commission vs APR) typically adds £150–£400 vs Hybrid in DCA-heavy files.
Threshold cliffs
The Commission-repayment gate (≥50% TCC and ≥22.5% of loan and tie) (§1.26) creates cliff-edge downgrades: cases at 33–49% TCC look economically similar but fall to Hybrid — £300–£900 lost per file.
Data-gap mechanics
The model allows medians and modelled schedules where data are missing (§1.27, §1.32). Medians compress outliers (older, high-APR, long-term), and early-settlement recalcs are error-prone — we routinely see £100–£300 understatement per file when defaults/settlements are mis-handled.
Legal levers to increases quantum (what to plead and prove)
Lever
  • APR differential (Miss-L logic)
  • Compensatory interest
  • Hybrid averaging
  • Thresholds and "tie in substance"
  • Data-gap rebuttal
Evidence
  • Prove the achievable no-conflict APR in that lender/broker panel and year (rate-cards, floor-rate schedules, score-to-rate matrices). Where the true relative gap exceeds 17%, courts/FOS can award the full differential, not the proxy.
  • Use bank statements and credit files to show deprivation of funds at credit-card/overdraft APRs (20–35% APR; >35% EAR). Even if a judge does not adopt contractual rates, 8% simple is common and explicitly compatible with commission-plus-interest reasoning endorsed in Johnson.
  • Ask for the higher-of the two remedies (Commission Repayment or APR Loss). The hybrid is a regulatory policy (§1.28), not a legal necessity under s.140A CCA; courts aren't bound to average.
  • Borderline high-commission cases (e.g., 30–49% TCC, 8–22% of the loan) plus panel restrictions/ROFR can be pleaded as Johnson-like unfairness in substance; seek full commission repayment.
  • Demand actual cashflows (Option-1) and early-settlement statements; resist medians when originals exist. Mis-reconstruction regularly adds triple-digit pounds.
Re-sizing the outcome ranges using the FCA’s own volumes
The FCA states 32.5m regulated agreements (2007–Oct 2024) (§1.3) and models redress due in 43.6% (14.2m) (§1.22). Holding the FCA's participation and breach structure constant, the average drives the system total:

Bottom line: Using only the FCA's own volumes, a £5–£10bn under-compensation gap emerges once you replace the 17% proxy and 2.09% interest with file-evidenced numbers, or drop hybrid averaging for higher-of.
File-level uplift, illustrated: transparent maths the court will accept
Example (typical PCP): £10,000; 48 months; original APR 10%; payments monthly; redress date mid-2026.
FCA path
17% haircut → 8.3% APR → instalment overcharge ~£388; interest at 2.09% simple on each overcharge item produces APR remedy ~£440–£460.
Commission trail £900 → Commission remedy ~£950–£1,020.
Hybrid ≈ £695–£740
Litigated path
Evidence shows panel floor APR 7.5% (25% haircut). Instalment overcharge ~£520–£540. Interest at 8% simple on each overcharge item adds ~£120–£180 (timing-dependent) → APR remedy ~£640–£720.
If the court takes higher-of (not averaged), consumer receives £950–£1,020 or £640–£720 — whichever is larger.
Outcome: £950–£1,020
Delta vs scheme: typically £200–£500 per agreement. Stack across even 500,000 underpaid files and the recoverable shortfall approaches £100–£250m; across millions, billions.
Operational playbook for CMCs and solicitors: turning gaps into wins
Data pack requests (standardised)
Broker rate-cards, floor-rate schedules, score-to-rate matrices; commission grids (incl. volume/ancillary); panel/ROFR agreements; actual cashflow histories and early-settlement statements; securitisation pool tapes where relevant (APR bands by risk-score).
Triage logic
01
Johnson-like (high commission + tie)
Plead full commission repayment + interest; resist hybrid.
02
DCA / Miss-L (APR driven)
Prove >17% achievable reduction and seek 8% interest.
03
Hybrid under-payer
Elevate interest with deprivation-of-funds evidence; audit settlement maths; push higher-of where fairness facts justify.
Data-retention constraint (real-world)
While the scheme runs to Nov 2024, many lenders' operational systems retain full-fat records for 6–7 years. CP25/27 shows the FCA nonetheless obtained vast historical data (§§3.3–3.5), but gaps remain (§1.32). Where lenders claim "no records" for older loans, use credit-reference data, securitisation prospectuses, and panel documentation to reconstruct APR and commission. Courts accept best-evidence reconstructions when primary records are missing due to firms' retention policies.
Regulatory guardrails
Keep consumer comms factual (CMCOB), emphasise scheme is automatic, and position services as audit/challenge of offers, not guaranteed outcomes.