As court rulings unfold, the FCA is currently weighing two potential redress models: opt-in and opt-out. Opt-in requires customers to actively request compensation from lenders. While this may limit the volume of remediation cases, it places the burden on consumers to come forward.

Opt-out automatically includes all eligible customers unless they choose to be excluded. This approach is more inclusive but in many cases will be more complex for firms to manage.

While we wait on further detail from the FCA, which is expected around six weeks after the Supreme Court ruling, affected firms need to be able to accommodate either outcome in their planning.

One of the challenges firms must brace for in the event of an opt-in redress scheme is a likely rise in fraudulent claims. There are multiple ways this could materialise from identity fraud to engaging with claims management companies and law firms on the same claim.

Dealing with this will hinge on the ability to cross-reference sales records with identity and document verification measures to ensure claims are legitimate and that claimants are who they say they are

Opt-out redress schemes demand accurate, up-to-date customer data. But with DCAs going as far back as 2007, many lenders are working with ageing databases. Customers will have moved house, changed marital status (and surname) or changed contact details, making it difficult to reach them, as well as cases where customers have passed away meaning claims may go to the legacy estate.

Legacy data issues such as duplicate records, missing fields, or outdated contact information can lead to delays, missed deadlines, and regulatory penalties. It also increases the cost and complexity of redress implementation.

Since the FCA began its investigation in early 2024, over 2.5 million complaints have already been submitted. That number continues to rise.

Firms that are prepared can reduce their exposure to risk, avoid reputational damage, and stay ahead of regulatory scrutiny. Waiting for clarity could mean falling behind and incur greater costs.

In short, the message is clear: clean your data, understand your exposure, and prepare to act decisively when the time comes.

LexisNexis® Risk Solutions are helping motor lenders understand where they are well covered and where they are exposed to risk through data audits designed to help assess the health of customer databases, identify gaps, and prepare for remediation. Learn more here.