Updated guidance on the handling of car finance claims in insolvency appointments

In September 2025, we, together with ICAEW and the IPA (the Recognised Professional Bodies (RPBs)), issued interim guidance setting out expectations regarding the treatment of potential motor finance redress awards pending the outcome of Financial Conduct Authority’s (FCA) consultation on the design of a proposed redress scheme.

Proposed redress scheme

The FCA issued its policy statement regarding the redress scheme in March, and the scheme rules came into effect on 31 March 2026.  
 
Following the publication of the policy statement, the RPBs have been working on updated guidance for office holders in readiness for the announced introduction of the scheme(s) later in the year. As part of this work, the RPBs shared the outline of the proposed guidance with creditor agents to give them the opportunity to consider its content and aims in conjunction with their creditor clients. The feedback received from agents so far has been positive. The Insolvency Service also expressed its support for the proposed guidance.

We’re aware that the scheme is subject to a legal challenge. The FCA has subsequently published a statement following the four legal challenges to the scheme and has stated that it’ll robustly defend the scheme. The FCA has also published a further statement setting out what its firms and consumers should do pending the outcome of the legal challenge, in which they also highlight that the timescale for the cases to be heard by the court is uncertain, but unlikely to be before October. 

Current guidance 

The FCA scheme, as set out in the rules, places significant emphasis on requirements for the lender to identify those who’d be entitled to compensation. They’d also be required to take steps to identify individuals who may be subject to relevant insolvency procedures and take steps to ensure that any compensation will be paid to the relevant party entitled to receive any compensation in accordance with insolvency provisions. 

In light of this, and with the continued uncertainty, the RPBs’ guidance for office holders remains unchanged and is set out in the joint interim guidance. To reiterate briefly, these are: 

• Office holders should not undertake investigations across their portfolios of personal insolvency cases to identify possible redress claims.
• Case closure should not be delayed in the expectation of redress being awarded.
• No action should be taken to instruct a claims management company or law firm to pursue potential claims.
• Clear explanations should be provided to debtors setting out what could happen to any redress they might receive.

Future guidance 

Once the outcomes of the legal challenges are known, the RPBs will issue further guidance on how the scheme(s) (if implemented) will impact personal insolvency cases.