As the FCA consults on its proposed industry-wide motor finance compensation scheme, the debate has rightly focused on fairness, consistency, and proportionality. But beneath the headlines lies a complex operational challenge that will determine whether the scheme delivers for consumers and firms alike: how to fairly and securely reconnect with customers whose agreements may date back as far as 2007.
Between 2007 and 2024, according to the FCAs analysis, an estimated 14 million credit agreements could fall within scope. Many consumers have since moved home, changed banks, or updated their contact details. For lenders, that creates a fundamental tension: how to make compensation accessible while protecting against error, fraud, and duplication.
Tracing Seventeen Years of History
Firms will need to locate and contact customers with limited and often fragmented historical data. Most lenders will hold legacy records from multiple systems or brokers, many pre-dating modern data standards. In practice, this means using credit bureau data to refresh address, contact, and status information, a process known as tracing.
Modern tracing tools can identify current residences, detect deceased or insolvent individuals, and provide confidence scores indicating the likelihood of a successful contact. It is important to note that these services only validate information proactively provided by the lender. Credit bureaus cannot independently search for or supply consumer records unless a lender submits specific data attributes such as name, date of birth, and previous address to be matched. The quality of any tracing output therefore depends directly on the quality of the lender’s own historical data.
The challenge is not just technical. Tracing must be carried out under a clear governance framework that ensures lawful basis for data use, accuracy in matching, and appropriate communication tone, particularly when reaching consumers who may have had no contact with their lender for multiple years.
The Opt-In Moment: More Than Consent
The FCA’s consultation proposes that customers identified by lenders will be invited to opt in to the scheme. On the surface, this seems straightforward. In practice, it will be one of the most critical control points in the entire process.
The opt-in stage can do much more than confirm participation; it can help firms rebuild an accurate record of the customer relationship. A well-designed digital PORTAL could:
- Capture and validate historical finance agreements, car registration/VIN details, and previous addresses.
- Allow customers to securely upload or confirm their current bank account information.
- Refresh consent and contact preferences in line with today’s communication standards.
- Provide a structured space to re-verify identity before any redress is paid.
Handled this way, the opt-in process becomes a reconstruction point, combining data validation, customer engagement, and fraud prevention in a single, auditable step.
However, not all customers will be comfortable or equipped to engage digitally. Many will prefer to respond by email, letter, or telephone. Firms will therefore need a mechanism, supported by trained resource, to input and validate these interactions within the same PORTAL system. This ensures all customers are treated consistently, that evidence is centralised, and that non-digital contact does not become a weak point in the control framework.
Firms that take this blended approach, digital-first but inclusive of traditional channels, will not only improve reach and fairness but also strengthen the overall reliability of their data and decision-making.
Bank Account Verification and Payment Security
Over a 17-year span, consumers’ banking relationships will have evolved dramatically. Current-account portability, fintech entrants, and account closures all increase the risk of payments being misdirected. The scheme will require firms to validate that the person opting in is the rightful account holder before funds are released. Bank-account verification services, available through credit bureaus and fintech providers, can check that a name, address, and date of birth match the nominated account.
Embedding these checks into the opt-in PORTAL, rather than treating them as an afterthought, will reduce operational cost and strengthen consumer confidence that redress payments are handled securely.
Balancing Speed, Fairness, and Evidence
The FCA has signalled its intention to deliver compensation in a way that is “orderly, consistent, quick and efficient.” Those goals can only be achieved if the data foundations are strong.
There will be practical trade-offs between completeness and timeliness. Some cases will involve partial matches or outdated data, requiring human review. Others may demand collaboration between lenders and brokers to validate legacy commission arrangements or disclosure records.
A pragmatic approach is likely to combine:
- Automated tracing and validation for high confidence matches.
- Manual investigation and consumer re-verification for exceptions.
- A transparent audit trail to evidence each decision path.
This balance will help firms demonstrate control and proportionality without paralysing progress.
Looking Ahead
The industry is ready for resolution, but resolution that stands up to scrutiny and restores confidence. As the consultation period unfolds, firms have an opportunity to shape how tracing, opt-in, and payment validation are designed. The objective should be clear: a process that feels fair, functions efficiently, and reflects the same duty of care that now defines financial services.
The FCA’s paper rightly focuses on fairness and consistency. The operational challenge ahead is to translate those principles into practice, with data accuracy, consumer validation, and secure payment infrastructure forming the backbone of delivery.
The consultation remains open, but one thing is already clear: the success of the scheme will depend as much on how firms find and verify their customers as on how they calculate what is owed.
If you’d like to talk through practical next steps for your organisation, we’re here to help. Contact a member of our Motor Finance Specialists below:
Tom Jeffery – Author & Operations Director
Sean Kulan – Client Relationships Director
Roma Pearson – Senior Advisory Director
