Brief
FCA Week in Review: Motor Finance Redress, Operational Resilience, and Deferred Payment Credit Rules Finalised
This week's FCA publications finalise £7.5bn motor finance redress, operational incident reporting standards, and bring Buy Now Pay Later under regulation - with immediate compliance implications.
Michaela Clarke
Operations & Compliance Coordinator
At a Glance
Firms face £7.5bn in motor finance redress costs starting immediately under PS26/3, with most claims to be settled by end-2027. PS26/4 also confirms a £112.9m FSCS levy effective 1 April 2026, while PS26/2 and PS26/1 finalise operational incident reporting and Deferred Payment Credit rules.
This Week's Developments
REF: PS26/3 Motor finance consumer redress scheme
The FCA has shifted from consultation to enforcement, mandating an industry-wide scheme covering 2007-2024 with £7.5bn in expected payouts. Unlike previous discretionary complaints handling under DISP 1.3, this mandatory scheme applies a presumption of redress and standardised calculation methodology to eligible 2007-2024 cases.
REF: PS26/2 Operational incident and third party reporting
The FCA is moving beyond SYSC 21.1.1R's general resilience principles to prescribe exact incident reporting thresholds and third-party oversight for payments firms.
REF: PS26/1 Regulation of Deferred Payment Credit
What was marketed as BNPL now falls under full FCA regulation as Deferred Payment Credit (DPC) from 15 July 2026. The rules create a new product category distinct from existing BNPL offerings, requiring affordability checks and modified financial promotions.
REF: PS26/4 FSCS Management Expenses Levy
The £112.9m MELL (Management Expenses Levy Limit — the FSCS's annual operating-cost cap) for 2026/27 represents a 14% year-on-year increase, reflecting expanded FSCS IT infrastructure costs. Unlike compensation levies, this non-negotiable operational cost must be budgeted by all authorized firms before the 1 April 2026 implementation date.
REF: CP26/1 Value for Money Framework
Workplace pension providers face radical transparency requirements, including new forward-looking metrics and four-tier performance ratings.
What Firms Should Do
| Action | Owner | Deadline | Source |
|---|---|---|---|
| Establish motor finance redress working group to implement PS26/3 claims handling process | Chief Claims Officer | 15 April 2026 | PS26/3 para 2.14 |
| Update CONNECT operational incident reporting templates per FG26/3 Appendix A | Head of Operational Resilience | 18 March 2027 | PS26/2 Section 5 |
| Submit Deferred Payment Credit product applications via Gabriel system | Product Compliance Lead | 30 June 2026 | PS26/1 para 3.7 |
| Calculate 2026/27 FSCS MELL allocation using latest FCA fee-block methodology | Finance Director | 1 April 2026 | PS26/4 Annex 1 |
The Bigger Picture
This week's publications span redress (PS26/3 motor finance), operational standards (PS26/2 incident reporting), product regulation (PS26/1 DPC), and funding (PS26/4 FSCS levy).
Source Evidence
| Source | Document type | Published | Why it matters |
|---|---|---|---|
| PS26/4: Financial Services Compensation Scheme - Management Expenses Levy Limit 2026/27 | Policy Statement (PS26/4) | 31 March 2026 | Mandatory £112.9m industry levy for FSCS operational costs |
| PS26/3: Motor finance consumer redress scheme | Policy Statement (PS26/3) | 30 March 2026 | £7.5bn binding redress scheme for 2007-2024 cases |
| PS26/2: Operational incident and third party reporting | Policy Statement (PS26/2) | 18 March 2026 | Standardised incident reporting thresholds and third-party oversight |
| PS26/1: Regulation of Deferred Payment Credit (unregulated Buy Now Pay Later) | Policy Statement (PS26/1) | 11 February 2026 | BNPL products brought under FCA regulation as DPC |
| CP26/1: The Value for Money Framework | Consultation Paper (CP26/1) | 8 January 2026 | Proposed workplace pension performance metrics and ratings |
Frequently asked questions
How does the motor finance redress scheme differ from normal DISP complaints handling?
PS26/3 overrides normal DISP 1.3.1R processes by creating a mandatory scheme with presumption of redress for eligible cases between 2007-2024. Firms cannot apply normal complaints assessment criteria and must follow the FCA's standardised redress calculation methodology.
What constitutes a 'material third party' under PS26/2 operational resilience rules?
FG26/4 defines material third parties as those providing services impacting critical operations, with specific thresholds based on transaction volumes (10%+) or customer impact (50,000+ users). The guidance requires firms to maintain registers mapping these relationships against SYSC 21.1.1R critical services.
Can existing BNPL products continue unchanged under DPC regulation?
No. PS26/1 creates a new regulated product category with distinct CONC rules around affordability assessments and financial promotions. Firms must either modify products to meet DPC standards or restructure them as regulated credit agreements by 15 July 2026.
Need expert regulatory guidance?
Our ex-regulator team helps firms navigate complex requirements and evidence compliance with confidence.
Book a Free Scoping CallRelated insights
View all insights →
Inactive Appointed Representatives: Oversight Evidence for Principal Firms
Principal firms must maintain documented oversight of inactive appointed representatives, with clear REP025 explanations and timely relationship decisions.
SIPP reform: due diligence and asset controls under FCA CP26/20
CP26/20 proposes explicit SIPP due-diligence rules and a Pension Scheme Money and Assets regime. We examine the evidence and operating-model decisions.
Strengthening Consumer Duty Board Reports: From Data to Actionable Evidence
How boards can transform Consumer Duty monitoring data into clear evidence of customer outcomes, meaningful challenge and accountable actions.