IPA responds to FCA Motor Finance Redress Scheme consultation: Protecting creditor returns and professional standards

10 December 2025

Following the Supreme Court judgment in August on motor finance commission mis-selling, the FCA has consulted on a consumer redress scheme. As the regulator of insolvency practitioners handling more than 300,000 appointments, the IPA has responded because this scheme directly impacts our core statutory obligations under the Insolvency Act 1986: maximising returns to creditors, protecting the public interest, and ensuring fair treatment across the profession.

The scale of the issue

The IPA has quantified the impact on insolvency estates as follows:

The FCA estimates that 14.2 million motor finance agreements may qualify for redress, representing approximately 26.3% of UK adults. We applied this same proportion to the current insolvency population to estimate affected individuals:

• 93,000 individuals in IVAs (from 360,000 live IVA cases)
• 6,470 individuals in PTDs (from 23,600 live PTD cases in Scotland)
• 2,000 individuals in bankruptcy (from current bankruptcy population)

Total: 101,470 individuals currently in formal insolvency procedures who may have qualifying claims.

Based on the FCA’s estimated average compensation of £700 per claim, this represents £71 million in potential value to insolvency estates.

Why insolvency register screening is essential

Our analysis reveals the financial impact if the FCA proceeds without proper insolvency protocols.

Without mandatory register screening: Finance firms cannot identify which of the 383,600 live insolvency cases have qualifying claims. Manual investigation of every case would be required, creating:

• Search costs: £76m (383,600 cases × £200)
• Claims management fees: £21m (30% of £71m)
• Gross compensation: £71m
• Net result: £27m DEFICIT

With IPA’s recommended protocols: Mandatory screening against public UK insolvency registers transforms the outcomes:

• Automated screening costs: £8m (90% saving)
• Claims management fees: £14m (20% cap)
• Supervisor fees: £9m
• Net to creditors: £40m (57% return)

The difference: £67.3m – from deficit to meaningful recovery.

Our six key recommendations

The IPA has proposed a comprehensive insolvency protocol that should include:

1. Mandatory insolvency register screening – Finance firms must check UK registers before making payments to ensure correct legal entitlement
2. Direct payment to office holders – For current IVAs, PTDs and bankruptcy cases, avoiding incorrect payments to individuals
3. 20% CMC fee cap – Extending the PPI precedent to protect creditor returns (saving £7.1 million compared to 30% cap)
4. Industry working group – Including IPA, Insolvency Service, Accountant in Bankruptcy, and R3 to coordinate implementation
5. 6-month preparation period – Allowing IPs to develop systems, train staff and establish processes before scheme launch
6. Claim window (up to 24 months) – recognising that investigating historic motor finance across insolvency portfolios takes time

What this means for you

With our recommended protocols:

• Finance firms screen registers and contact office holders directly
• Clear payment protocols eliminate confusion and disputes
• Creditors receive £40m returns instead of £27m deficit
• Professional standards protected through proper coordination

Reminder: Joint RPB interim guidance remains in effect:

• Do NOT undertake speculative investigations
• Do NOT delay closures of compliant IVAs/PTDs

If you have any queries, contact David Holland, IPA Chief Inspector, at davidh@ipa.uk.com or the IPA Regulation Team at regulation@ipa.uk.com.

The bottom line

The motor finance redress scheme can deliver £71m value to insolvency estates, but only with proper protocols. Without mandatory register screening, the scheme will cost creditors £27m more than it delivers.

Our analysis shows insolvency protocols aren’t optional; they’re economically essential. The £67.3m difference between deficit and recovery makes this clear.

The IPA’s response ensures the FCA understands what’s required to make this scheme work with, not against, established insolvency processes.