Limits on lookback: the impact of time-bars on the FCA’s motor finance consumer redress scheme

On 30 March 2026, the FCA published the finalised rules for its redress scheme to compensate consumers for the inadequate disclosure of motor finance commission. The scheme rules came into force on 31 March 2026 although firms have until 30 June 2026 before they must start contacting affected consumers.

In the second of a series of three bulletins looking at the FCA's recently published consumer redress scheme for motor finance commissions, we consider how the scheme might award compensation to consumers in relation to agreements entered into as long ago as April 2007 when claims would normally be time-barred from the date falling six years after the end of the agreement.

Introduction

Our previous bulletin on the redress scheme considered the risk that the FCA do not have the power to compel firms to compensate consumers in relation to agreements entered into prior to 1 April 2014 (when the FCA assumed supervisory authority over regulated firms). The FCA have sought to mitigate this risk by adopting two separate schemes (the first covering agreements entered into between 6 April 2007 and 31 March 2014, the second covering agreements entered into between 1 April 2014 and 1 November 2024) (together, the Schemes). However, until the end of June 2026, interested parties will be able to apply for judicial review to test either the legality of the first Scheme by reference to this question of powers or the legality of both Schemes by reference to other issues. Should this happen, some (perhaps a material) delay to the implementation of the first or both Schemes seems inevitable.

Independently of these risks, one of the FCA’s stated objectives in proposing the Schemes is to resolve claims win a simpler, swifter and more cost-effective manner than by consumers complaining to the Financial Ombudsman or commencing proceedings in court. In this context though, the question of limitation may still prove contentious.

Limitation: an unresolved issue?

As well as the question of the FCA’s powers, the proposal that the Schemes compensate consumers in relation to agreements entered into as long ago as 6 April 2007 raises separate limitation issues. A scheme under section 404 Financial Services and Markets Act 2000 can only compensate a consumer in respect of a loss for which they have a remedy in law. Consumers have no remedy in law for claims that have become time-barred under the Limitation Act 1980 (LA).

The ordinary limitation period for claims relating to an unfair relationship under section 140A Consumer Credit Act 1974 (CCA) runs for six years from the end of the agreement giving rise to the relationship. Accordingly, without an extension of limitation, any consumer whose motor finance agreement ended prior to 26 March 2020 (six years before the Schemes’ rules came into force) will be time-barred from bringing an unfair relationship claim against their lender, and should be ineligible for compensation under the Schemes.

The FCA’s approach on this has been to argue that there was widespread ‘deliberate concealment’ of the fact that commission was being paid by lenders to dealers. Where such ‘deliberate concealment’ occurred, the relevant limitation period can be extended under section 32 LA, rendering consumers whose claims would otherwise be time-barred eligible for compensation under the Schemes. However, extension of the limitation period under section 32 LA is not indefinite: it only lasts until the consumer discovers the concealment of the facts relevant to their claim or “could with reasonable diligence have discovered it”.

The FCA did not adopt a number of suggestions regarding their proposed approach on limitation. Citing the Supreme Court decision in Potter,¹ they rejected the argument that the failure adequately to disclose details of commission paid falls short of deliberate concealment. Potter held that ‘concealment’ arises simply if a party facilitates a scenario in which the claimant is unaware of a fact relevant to their claim, and ‘deliberate concealment’ occurs where a party intends to and does in fact withhold a relevant fact from the claimant. While this appears to be a correct application of Potter, it does not address other difficulties around the extension of limitation periods. Will there have been “deliberate” concealment where the lender/dealer did disclose to the consumer the fact that a commission will or may be paid, but did not disclose the amount of commission? Moreover, any extension of limitation should end when the consumer could, with reasonable diligence, have discovered the previously concealed fact relevant to their claim. In this regard, the FCA have been investigating motor finance commissions since 2017, announced in January 2019 that most dealers were failing to disclose commissions to consumers, and in January 2021 banned discretionary commission arrangements (DCAs). Claims management companies and law firms have also been highly active in advertising and signing up claimants for several years now. Does any of this publicity curtail the extension of limitation?

With one exception, the finalised rules for the Schemes do not contain any change of position on limitation, although the FCA have provided further guidance on their policy decision on the issue. Most relevantly, the FCA’s position remains that it is for the relevant firm to determine, on a case-by-case basis, whether a consumer is ineligible for compensation due to expiry of the applicable limitation period (although consumers can appeal the firm’s decision to the Financial Ombudsman). As such. it is not difficult to see this issue proving highly contentious in implementing the Schemes:

There is an initial question as to whether the FCA should be providing detailed guidance on the extension of limitation periods under section 32 LA given they expressly acknowledge that the issues are highly fact specific and involve material uncertainties, and when their guidance reverses the courts’ approach on extending limitation periods where the burden of proof lies with the claimant. The FCA accept, on the one hand, that “the limitation assessment is a fact sensitive one and must be conducted on a case-by-case basis” but, on the other hand, raise a number of arguments (considered below) supporting their prior statement that they do “not expect lenders to be routinely finding that a case is out of time for the scheme”. They also acknowledge that the practical effect of their limitation guidance is that, under the Schemes, it is firms which will be “required to demonstrate that the limitation period had not been extended in a case before determining it is time barred” when “in civil proceedings, the burden of demonstrating deliberate concealment under section 32(1)(b) LA would fall on the consumer”. Given these acknowledged issues, the Schemes could have left the issue of limitation to be determined by firms without such detailed guidance. If consumers wish to challenge the exclusion of their claim on limitation grounds, the Schemes note that they can refer the issue to the Financial Ombudsman and they will also retain the right to pursue a court claim.
The FCA’s (non-binding) guidance on limitation is that there will have been deliberate concealment of the existence of a DCA or a commercial tie, and (subject to one exception) high commission where there was a failure “clearly and prominently” to disclose not just the fact or possibility of commission or a close tie, but also certain additional features. Those additional features are, however, the same as those which the Schemes’ rules require firms to have disclosed to consumers in order to avoid liability for inadequate disclosure in the first place. So, unless a firm discloses to a consumer the same information regarding commission or commercial ties as constitutes adequate disclosure under the Schemes’ rules, exculpating the firm from liability to the consumer, it will (according to the FCA’s guidance) also have deliberately concealed the relevant facts from the consumer so as to extend the limitation period. Under the Schemes, the FCA are (and accept that they are) suggesting that the same test should apply for what constitutes an unfair relationship under section 140A CCA (based on inadequate disclosure) and for what amounts to deliberate concealment under section 32 LA while noting that the legal tests under the two statutory provisions “are not the same”. In substance, the suggestion is that if there was inadequate disclosure of a relevant feature under any agreement entered into on or after 6 April 2007 so as to give rise to potential liability under the Schemes, there will (absent unusual, case-specific circumstances) also have been deliberate concealment preventing the firm raising limitation as a defence. As this is only FCA guidance, rather than a rule of the Schemes, it is unlikely to be challenged in any judicial review, but might some firms take a different view on limitation when implementing the Schemes? For example, notwithstanding the FCA’s guidance, might a firm conclude that a statement in the loan documentation that ‘commission will be paid to the dealer’ does operate to prevent the consumer claiming deliberate concealment (so as to extend limitation)? Alternatively, might another firm conclude that such a statement should put a reasonably diligent consumer on notice to make further inquiries and discover the commission arrangement so as to curtail any extension of limitation?²
As regards curtailing the extension of limitation where the consumer could “with reasonable diligence” have discovered the concealed facts, the FCA guidance posits that “it is unlikely that, in most cases, a court will find that consumers became aware of the concealment in their case because of media coverage or the FCA’s public announcements about motor finance commission as these were too general to reveal the specifics of the consumer’s own claim”. On this aspect, the FCA again refer to the Potter decision (which concerned undisclosed commission for payment protection insurance (PPI)). They note that the Supreme Court considered that the claimant only discovered that commission had been paid when she visited her lawyer shortly before commencing a claim and say there was no suggestion by the court that the publicity surrounding the Supreme Court’s separate (and pivotal) judgment on PPI (Plevin)³ or other regulatory announcements did or should have put her on notice such that she could, with reasonable diligence, have discovered the commission. However, so far as we can tell, this point about the publicity surrounding the Plevin decision was neither argued nor considered in Potter. Given the extensive publicity around motor finance commission arrangements, going back to 2017 when the FCA began investigating, might firms take a different view from the FCA when determining individual cases?
The FCA have themselves departed from the scheme rules they originally proposed by excluding agreements which involved high commission but which ended before 26 March 2020 and in relation to which there was “clear and prominent disclosure of the bare fact or possibility [but not the amount] of commission”. The FCA’s reasoning is that disclosure of the existence or possibility of commission being paid should have caused a reasonably diligent consumer to investigate the position, discover the amount of commission and challenge it within the normal six year limitation period. However, why disclosure of the fact or possibility (but not the amount) of commission prevents an extension of limitation in high commission cases (by rendering the customer responsible for making inquiries) but not in DCA or tied arrangement cases is not wholly clear. The FCA’s suggestion that disclosure of the mere fact or possibility of commission in a DCA or tied arrangement case would not have enabled a reasonably diligent consumer to have discovered that the dealer had discretion to set the interest rate under a DCA or the existence of a tie is only that – a suggestion.

So far as implementation of the Schemes is concerned, it is difficult to see the FCA’s detailed guidance on the extension of limitation periods other than as a message to firms that they should “not … be routinely finding that a case is out of time for the scheme” and that it is for firms to demonstrate to consumers that claims under older agreements are time-barred because the limitation period has not been extended by ‘deliberate concealment’. Firms are not though, under any obligation to follow this guidance and it remains to be seen whether they will do so. As such, there may be tension between consumers’ expectations that they will be compensated in relation to motor finance agreements that ended before 26 March 2020, and firms’ ability to conclude that the applicable limitation period has expired. In turn, that risks consumers appealing their rejected claims to the Financial Ombudsman or commencing court proceedings, situations the Schemes were supposed to avoid or at least minimise. Moreover, notwithstanding the FCA’s guidance under the Schemes, if there is a court case on the issue, it will be for the consumer to prove that the limitation period has been extended (and not for the firm to prove that it has not). In its feedback on the consultation, one trade body suggested to the FCA that a test case should be brought to obtain a court ruling on the extension of limitation periods in relation to the types of claim covered by the Schemes. Citing that it would be difficult to find an appropriate test case given the number of different motor finance fact patterns and that it would delay the Schemes further, the FCA have opted against such a test case.

Next steps

It remains to be seen whether the first scheme (for the 2007 to 2014 period) will be challenged in the courts, whether such a challenge succeeds, and whether the FCA’s decision not to pursue a test case to obtain a judicial ruling on the extension of limitation periods in motor finance cases makes limitation a key area of dispute in the implementation of the Schemes.
Our final bulletin will consider the changes the FCA have made to the Schemes based on consultation feedback.

¹ Potter v Canada Square Operations Ltd [2024] 1 Al ER 843
² In Potter, nether the fact nor amount of PPI commission was disclosed to the claimant.
³ Plevin v Paragon Personal Finance Ltd [2014] UKSC

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