FCA's £7.5bn Motor Redress Scheme and New BNPL Rules Demand Immediate Action

At a Glance

Firms face £112.97m in FSCS management levies effective 1 April 2026, while motor finance providers must prepare for a £7.5bn consumer redress scheme processing millions of claims by end-2027.

This Week's Developments

REF: PS26/4

The £112.97m Management Expenses Levy Limit (MELL) for 2026/27 represents a 7% increase over last year's cap. Firms should note this covers only FSCS operational costs - compensation levies will be billed separately. Insurance providers must update their financial provision calculations by 31 March 2026.

REF: PS26/3

The motor finance redress scheme mandates lenders review all 2007-2024 agreements for discretionary commission arrangements. With £7.5bn allocated, firms must establish dedicated claims teams and submit remediation plans to the FCA within 60 days of publication.

REF: PS26/2

New operational incident reporting rules require payment firms to implement standardised incident classification systems by 18 March 2027. The rules specifically reference SYSC 21.1.1R's resilience requirements, meaning firms must now map critical third-party dependencies.

REF: PS26/1

BNPL providers have until 15 July 2026 to register as credit brokers and modify their DPC agreements to include mandatory affordability checks. The rules create a new regulated product category distinct from traditional BNPL credit agreements.

REF: CP26/1

The Value for Money Framework proposals would require pension providers to submit forward-looking performance metrics via REP-CRIM by 30 September 2026. Firms should analyse how the new 4-point rating system impacts their competitive positioning.

What Firms Should Do

The Bigger Picture

This week's publications reveal three strategic FCA priorities: consumer redress (PS26/3's £7.5bn motor scheme), closing regulatory gaps (PS26/1's BNPL rules), and operational resilience (PS26/2's incident reporting).

Source Evidence

Plain English Glossary

• MELL - Management Expenses Levy Limit. The annual cap on the FSCS's operating costs that all authorised firms must contribute towards.
• DPC - Deferred Payment Credit. FCA-regulated category for buy-now-pay-later style credit agreements that defer payment without charging interest.
• REP-CRIM - Financial Crime Return. Annual financial crime data return that in-scope firms must submit to the FCA via the Connect system.
• SYSC - Senior Management Arrangements, Systems and Controls. FCA Handbook section covering governance, risk management, and operational control expectations.
• DISP - Dispute Resolution: Complaints. FCA Handbook section setting out how firms must handle, record, and resolve customer complaints.
• CONC - Consumer Credit sourcebook. FCA Handbook section setting conduct rules for firms providing or arranging consumer credit.
• FSCS - Financial Services Compensation Scheme. UK statutory compensation scheme that pays out to eligible customers when authorised firms fail.