Scheme 1 vs Scheme 2 — What’s the Difference?
Scheme status (updated 5 August 2026): parts of the FCA motor finance redress scheme are temporarily suspended while the Upper Tribunal considers legal challenges. Lenders do not currently have to calculate or pay compensation under the scheme, the original decision and payment dates no longer apply, and no payment under the scheme is guaranteed. If the scheme proceeds, first payments are expected in 2027 at the earliest. Any dates mentioned below were set before the suspension.
The FCA confirmed motor finance redress scheme (PS26/3, 30 March 2026) is structured as two parallel schemes covering different time periods. This page explains the difference between Scheme 1 and Scheme 2, why they exist, what the practical implications are for your claim, and which scheme your agreement falls under.
Why Are There Two Schemes?
The FCA took over regulation of consumer credit on 1 April 2014. Before that date, consumer credit was regulated by the Office of Fair Trading (OFT). Because the FCA’s powers to impose a consumer redress scheme under Section 404 of the Financial Services and Markets Act 2000 are clearer for the period when it was the regulator, the FCA split PS26/3 into two schemes to protect the post-2014 scheme from any legal challenge that might arise against the pre-2014 scheme. If a court were to challenge the FCA’s power to impose redress for pre-2014 agreements, that challenge would not automatically invalidate the post-2014 scheme.
From your perspective as a consumer, both schemes produce compensation. The key differences are in the timelines, the calculation method and the complaint deadlines.
Which Scheme Does Your Agreement Fall Under?Scheme 1: Your finance agreement started between 6 April 2007 and 31 March 2014
Scheme 2: Your finance agreement started between 1 April 2014 and 1 November 2024
If you had agreements across both periods, each falls under its respective scheme and is assessed separately.
Key Differences Between Scheme 1 and Scheme 2
Compensation Calculation — APR Adjustment
The hybrid remedy used to calculate compensation applies a different APR adjustment rate for each scheme:
Scheme 1 (pre-2014): 21% APR adjustment. The FCA set a higher rate for the earlier period because DCA practices were more widespread and harmful before 2014 and APR differentials were larger.
Scheme 2 (post-2014): 17% APR adjustment.
In practice, the 21% vs 17% difference adds approximately £31 to the average payout for Scheme 1 agreements. Combined with the fact that compensatory interest accrues for longer on older agreements, Scheme 1 claimants often receive above the £829 national average.
Payment TimelineScheme 2: Determination by 30 September 2026 → Payment by November 2026
Scheme 1: Determination by 30 November 2026 → Payment by January 2027
The Johnson Remedy
In serious cases under both schemes, the Johnson Remedy — a full commission repayment rather than the hybrid remedy — may apply. This is reserved for the most egregious agreements where commission was exceptionally high (at least 50% of the total cost of credit and 22.5% of the loan). See: The Johnson Remedy — Full Commission Repayment
Which Scheme Pays More?
Scheme 1 agreements (pre-2014) generally produce higher payouts for two reasons: the higher 21% APR adjustment in the hybrid remedy, and the longer compensatory interest period (interest accrues from the date of the original overpayment, so older agreements accumulate more interest). If you had agreements under both schemes, your Scheme 1 payout is likely to be larger despite the vehicle being older.
Related Pages
How Long Does a Car Finance Claim Take?
The Johnson Remedy — Full Commission Repayment
Frequently Asked Questions
My agreement started in 2014. Which scheme do I fall under?
Agreements starting on or after 1 April 2014 fall under Scheme 2. Agreements starting before 1 April 2014 fall under Scheme 1. If your agreement started in early 2014, check the exact start date.
Do I need to do anything differently depending on which scheme I am in?
No. The complaint process is the same for both schemes. Submit your complaint to your lender referencing PS26/3. The lender will assess which scheme applies to your agreement.
Could Scheme 1 be delayed by a legal challenge?
The FCA structured the two schemes specifically to protect Scheme 2 from any legal challenge to Scheme 1. If a challenge to Scheme 1 were successful, Scheme 2 payments would continue unaffected. Both schemes are currently proceeding as planned.
I had agreements in 2013 and 2016. Do I complain twice?
You can include all agreements in a single complaint submission. However, each agreement is assessed separately under its respective scheme, with separate determinations and potentially separate payment dates.
You will be redirected to our partner’s website to complete your claim.
Think You May Have a Motor Finance Claim?
The FCA estimates average compensation of around £830 per eligible agreement, but eligibility and payment amounts vary. Some customers may receive nothing. Complaints about agreements started from 1 April 2014 should be submitted by 30 June 2026 to be considered under the earlier timetable. Different dates apply to older agreements. The scheme is currently subject to legal challenge, so dates and payment timings may change.
