So that’s nearly 600 pages on a scheme the FCA says will be “simple for people to use and lenders to implement”. The old saying of a ‘good day to bury bad news’ might be more appropriate.

So what might a firm think after an initial read? As Sir Chris Whitty once said during a COVID press release: “there are several things we don’t know; but all the things we do know are bad”.

But after a second, or even a third, read of the documents the view is probably more nuanced and depends on a lender’s position. If you’re a lender who has a lot of documents and data, and only did fixed commissions which don’t satisfy the definition of a ‘high commission arrangement’ (and didn’t have any ties), then you’re probably fairly happy.

But if you did a mix of discretionary and fixed commissions, and had ties, you’re probably thinking of your options. As James Bond said to Blofeld in Spectre: “Well, it’s all a matter of perspective”.

1. The nature of the scheme
   A consumer redress scheme under Section 404 of the Financial Services and Markets Act 2000.
2. Scope
   It applies to all regulated credit agreements entered into from 6 April 2007 and before 1 November 2024 which wholly or mainly financed a vehicle (but not consumers who have already been compensated).
3. Opt in or opt out
   It depends on whether there’s already a complaint (included unless they opt out) but other consumers will need to opt in.
4. Unfairness approach
   There will be a presumed unfair relationship where (subject to some ‘rebuttals’) if a customer did not know (a) there was a discretionary commission arrangement, (b) the commission was ‘high’ (ie 35% of the total charge for credit and 10% of the amount of credit) or (c) there was a contractual arrangement of tie giving exclusive or near exclusive rights to lenders to provide credit.
5. Interest
   Annual average Bank of England base rate plus 1%.
6. Rebuttals of unfairness
   If (a) there’s adequate disclosure (including both fact and nature of commission), (b) (for DCA) the broker selected the lowest rate or (c) the consumer was “sufficiently sophisticated”.
7. Compensation
   Refund of the commission in “rare” cases where there’s (a) a contractual tie and (b) the commission is at least 50% of the total charge for credit and 22.5% of the amount of credit. For everyone else, generally an award of the average of the FCA’s estimate of what they have overpaid, or lost. For non-DCA, can be some rebuttals.
8. Ombudsman
   Can look at compliance with scheme’s rules; will also deal with existing complaints.
9. Court
   Consumers can choose not to take part in the scheme and, instead, go to the Court.

Plan to get on top of the consultation so you can understand the key issues for your firm; plan for the different eventualities; and plan to lobby.