FCA Handbook - CONRED 6.1 Interpretation, application and subject matter of the scheme

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CONRED 6.1 Interpretation, application and subject matter of the scheme

Definitions used in this chapter

For the purposes of this chapter:

(1) ‘Annual percentage rate of charge’ means the rate of the total charge for credit, expressed as an annual percentage of the total amount of credit, calculated in accordance with regulations made under section 20 of the CCA.
(2) ‘Commission’ has the meaning given in CONRED 6.1.3(1).
(3) Complaint includes:
1. (a) a relevant motor finance DCA complaint; and
2. (b) a motor finance non-DCA complaint,
as each of those types of complaint are respectively defined in DISP App 5.1.2R and DISP App 5.1.3AR.
(4) ‘Consumer’ means any individual falling within the meaning of ‘consumers’ in section 404E of the Act and includes:
1. (a) a partnership consisting of 2 or 3 persons not all of whom are bodies corporate; and
2. (b) an unincorporated body of persons which does not consist entirely of bodies corporate and is not a partnership.
(5) ‘Credit broker’ means:
1. (a) a credit broker; or
2. (b) a person who was, at the time the relevant motor finance agreement was entered into, carrying on the business of credit brokerage pursuant to a licence issued by the Office of Fair Trading (OFT) under the CCA.
(6) ‘Disclosure information’ means the information described in CONRED 6.3.10R(1)(a) to (c).
(7) ‘Durable medium’ means, in writing:
1. (a) on paper; or
2. (b) using any instrument which:
  1. (i) enables the recipient to store information addressed personally to the recipient in a way that is accessible for future reference and for a period of time adequate for the purposes of the information;
  2. (ii) allows the unchanged reproduction of the information stored; and
  3. (iii) is not communicated by way of a social media platform, a short message service (SMS) or another similar commercial messaging service.
(8) ‘Early settlement payment’ means any payment to fully or partially discharge the consumer’s indebtedness under a motor finance agreement before the time fixed by that agreement, taking into account any rebate calculated in accordance with the formula at regulation 4 of the Consumer Credit (Early Settlement) Regulations (SI 2004/1483).
(9) ‘High commission arrangement’ means an arrangement under which the total amount of commission was at least:
1. (a) 39% of the total charge for credit; and
2. (b) 10% of the total amount of credit.
(10) ‘Implementation period’ means a period of 5 months beginning with the scheme effective date.
(11) ‘Lender’ means:
1. (a) a lender; or
2. (b) a person who was, at the time the relevant motor finance agreement was entered into, carrying on a consumer credit business pursuant to a licence issued by the OFT under the CCA.
(12) ‘Motor finance agreement’ means a credit agreement which was a regulated agreement within the meaning of section 189(1) of the CCA which, in whole or in part, financed the purchase of a motor vehicle or under which a motor vehicle was bailed or hired.
(13) ‘Motor vehicle’ means a mechanically propelled vehicle intended or adapted for use on roads to which the public has access.
(14) ‘Opt-in’ means a written notification from, or on behalf of, a consumer indicating that the consumer agrees for their scheme case to be assessed for liability under the scheme.
(15) ‘Opt-out’ means a written notification from, or on behalf of, a consumer indicating that the consumer does not want their scheme case to be assessed for liability under the scheme.
(16) ‘Primary records’ means records of the type described in CONRED 6 Annex 1.1G(1) to (3).
(17) ‘Priority debt’ means an obligation on the part of a consumer to make a payment:
1. (a) where the remedies for a breach of that obligation potentially include seeking possession of, or seeking to exercise a power of sale in respect of:
  1. (i) the sole or main residence of the consumer (for example, an obligation to pay secured by a mortgage or charge in respect of land, an obligation to pay rent under a tenancy, or an obligation to make payment under a licence to occupy land); or
  2. (ii) the consumer’s essential goods or services (for example, an obligation to pay under a hire purchase, conditional sale or hire agreement that relates to, or an obligation to pay secured by a charge on, the consumer’s cooker, refrigerator, or the means to travel to work); or
2. (b) where that obligation arises out of an order of the court, an Act or secondary legislation (for example, an obligation to pay council tax, child support maintenance, income tax or court fines); or
3. (c) where that obligation arises under a contract for the provision of utility supplies (for example, water, gas or electricity).
(18) ‘Relevant arrangement’ has the meaning given in CONRED 6.2.19R(1) to (4).
(19) ‘Scheme’ means the consumer redress scheme created by this chapter.
(20) ‘Scheme case’ means a case that satisfies each of the conditions in CONRED 6.1.17R.
(21) ‘Scheme effective date’ means 31 March 2026 and is the date that the scheme created by this chapter comes into force.
(22) ‘Secondary records’ means:
1. (a) contemporaneous records of the type described in CONRED 6 Annex 1.1G(1) to (3) relating to other consumers who were in a sufficiently similar position as the consumer in the scheme case, and which include information that demonstrates the standard practices of the lender or the credit broker at the relevant time; or
2. (b) records of the type described in CONRED 6 Annex 1.1G(4).
(23) ‘Successor’ means a person who is a creditor for the purposes of section 140A of the CCA by virtue of section 140C(2) of that Act.
(24) ‘Tied arrangement’ means a contractual arrangement between a lender and a credit broker under which the credit broker is required to:
1. (a) introduce consumers exclusively to the lender; or
2. (b) give the lender the option to provide an offer of credit to the consumer before the credit broker is entitled to approach another lender in respect of that consumer (including a ‘right of first refusal’ or an equivalent right of priority).
(25) ‘Total amount of credit’ means the total sums made available under a motor finance agreement.
(26) ‘Total charge for credit’ means the true cost to the borrower of the credit provided, or to be provided, under an actual or prospective motor finance agreement, calculated in accordance with regulations made under section 20 of the CCA.
(27) ‘Total amount of commission’ has the meaning given in CONRED 6.1.3R(2).
(28) ‘Unfair relationship provisions’ means sections 140A to 140C of the CCA.
(29) ‘Very high commission arrangement’ means an arrangement under which the total amount of commission was at least:
1. (a) 50% of the total charge for credit; and
2. (b) 22.5% of the total amount of credit.

The words and phrases that are in italics in this chapter have the meaning set out in the Glossary.

Meaning of ‘commission’ and related expressions

For the purposes of this chapter:

(1) ‘Commission’ means any commission, fee or other financial consideration or remuneration payable (directly or indirectly) by a lender to a credit broker in connection with the entering into of a specific motor finance agreement.
(2) ‘Total amount of commission’ means the sum of all commission payable in connection with the entering into of a specific motor finance agreement.
(3) All references to commission ‘payable’ refer to the amount of commission that the credit broker was entitled to receive under the arrangements providing for the payment of commission.
(4) In determining the amount of commission that was payable, the lender may refer to evidence of the actual amount of commission paid to a credit broker in connection with a specific motor finance agreement contained in its financial records (see CONRED 6 Annex 1.1G(1)(c)) if it is a reasonable proxy.
(5) References to ‘discretionary commission arrangement’ are to be read as including any arrangement which would, if it had been entered into on or after 28 January 2021, have constituted a discretionary commission arrangement.

(1) The definition of commission captures any commission, fee or other financial consideration or remuneration payable in connection with the entering into of a specific motor finance agreement. As such, it will not capture sums that were payable for meeting aggregated transaction, performance or ‘volume’ targets rather than attributable to specific motor finance agreements entered into by consumers. A sum payable for meeting a target based on a specified cumulative total of transactions is not captured because that sum is not referable to any specific transaction comprised in that cumulative total. Firms are not required to retrospectively apportion payments that were not attributable to specific transactions at the time.
(2) By contrast, if a commission sum was at the time attributable to a specific motor finance agreement, it will be caught by these rules irrespective of the administrative arrangements for the settling of that sum with the credit broker. For example, a payment made to the credit broker’s head office (rather than local dealership) which was calculated as a percentage of the total amount of credit is captured by the definition of commission, even if all such sums the credit broker was entitled to receive during a specified period (eg, over the year or per quarter) were in practice settled through a single administrative payment made at a later date. In these circumstances, each commission sum comprised in that payment is attributable to the entering into of a specific motor finance agreements rather than to the meeting of an ‘aggregated’ target.
(3) The definition of commission also captures commission that is payable indirectly. This will include where commission that a credit broker was entitled to receive under the arrangements providing for the payment of commission were paid to the credit broker:
1. (a) through an intermediary (including another credit broker); or
2. (b) by another third party on behalf of the lender (for example, under an arrangement where another company in the same group as the lender agreed to make the payment).
(4) To identify the total amount of commission, the lender will need to calculate the sum of all commission payable in connection with the entering into of the relevant motor finance agreement. This will mean, for example, that:
1. (a) where commission was payable under more than one type of commission arrangement (for example, where commission was payable under both a discretionary commission arrangement and a fixed fee commission arrangement), the total amount of commission is the sum of the commission payable under each type of commission arrangement;
2. (b) it does not matter if different commission sums within the total amount of commission were payable to different administrative functions of the credit broker, or at different points in time (see also (2) above); and
3. (c) where commission was payable to more than one credit broker in connection with the entering into of the same motor finance agreement, the total amount of commission is the sum of the commission payable to each of those credit brokers.

Further interpretation provisions: transactions involving more than one motor finance agreement

(1) This rule applies where a single motor vehicle sales transaction was financed by more than one motor finance agreement.
(2) The lender should treat the transaction as a single scheme case for the purposes of the steps required under this chapter.
(3) Provisions requiring a determination of the following in respect of a scheme case are to be interpreted in accordance with (2):
1. (a) whether one or more relevant arrangements is present; and
2. (b) whether there was a failure to provide adequate disclosure of one or more relevant arrangements giving rise to an unfair relationship that caused loss or damage (see third step in CONRED 6.3).
(4) For the purposes of (3)(a):
1. (a) the total amount of commission must be calculated by aggregating the total amount of commission for each motor finance agreement; and
2. (b) to identify whether the definitions of high commission arrangement or very high commission arrangement are met, the following must be calculated by aggregating the relevant values for each motor finance agreement:
  1. (i) the total amount of commission;
  2. (ii) the total charge for credit; and
  3. (iii) the total amount of credit.
(5) CONRED 6.4.23R applies for the purposes of calculating redress in scheme cases to which this rule applies.

Application to lenders

(1) This chapter applies to a lender in respect of a motor finance agreement it entered into with a consumer:
1. (a) in the circumstances described in (2);
2. (b) where the unfair relationship provisions apply in connection with the motor finance agreement; and
3. (c) where the consumer, at the time the agreement was entered into, was habitually resident in the UK.
(2) The circumstances referred to in (1)(a) are that:
1. (a) there were arrangements between the lender and a credit broker in connection with the entering into of the agreement relating to the payment of commission; and
2. (b) the agreement was entered into during the period beginning with 6 April 2007 and ending with 31 March 2014.

The provisions of this scheme are without prejudice to any rights of indemnity or contribution a lender may have against a credit broker under the contractual arrangements between them or pursuant to the Civil Liability (Contribution) Act 1978.

Application to credit brokers

The following provisions apply to a credit broker:

Where a credit broker receives a complaint in relation to the subject matter of the scheme, it must:

(1) forward the complaint to the lender; and
(2) inform the consumer that the complaint has been forwarded to the lender.

Application to successor where lender is insolvent or has ceased to exist

(1) Where the conditions in (2) are met, this chapter applies to the following person as if it were the lender in scope of CONRED 6.1.6R:
1. (a) for a motor finance agreement with a single successor, the successor; or
2. (b) for a motor finance agreement with multiple successors, the person who became a successor first in time.
(2) The conditions are:
1. (a) the motor finance agreement was entered into with a consumer by another person; and
2. (b) (i) that person is a lender in scope of CONRED 6.1.6R and is subject to insolvency proceedings; or
3. (ii) that person would have been a lender in scope of CONRED 6.1.6R but for the fact it ceased to exist before the scheme effective date.

Application to successors generally

Subject to CONRED 6.1.10R, the following provisions apply to successors in respect of a motor finance agreement:

Notwithstanding CONRED 6.1.10R and CONRED 6.1.11R, this chapter does not apply to a successor in respect of a motor finance agreement if that person became the successor after the fixed term of the motor finance agreement expired.

(1) The definition of successor means that a person who has been assigned rights under a motor finance agreement will only be in scope if there was a legal assignment under section 136 of the Law of Property Act 1925, with notice being given to the consumer.
(2) A successor may be in scope of this scheme even if it is an unauthorised person because of the expanded definition of a relevant firm in section 404F(5) of the Act.

The provisions of this scheme are without prejudice to any rights of indemnity or contribution a successor may have against a lender under the contractual arrangements between them or pursuant to the Civil Liability (Contribution) Act 1978.

Duration of the scheme

The scheme comes into force on the scheme effective date and has no end date.

Subject matter of the scheme

The subject matter of the scheme is whether, in a scheme case, there was inadequate disclosure of any of the following in connection with the entering into of a motor finance agreement:

(1) a discretionary commission arrangement;
(2) the payment of commission;
(3) a tied arrangement; or
(4) any other arrangement between a lender and a credit broker under which the credit broker was incentivised (directly or indirectly) to introduce consumers wishing to enter into motor finance agreements to that lender.

Scheme case

(1) A ‘scheme case’ is a case that satisfies each of the following conditions:
1. (a) it involves a motor finance agreement falling within CONRED 6.1.6R;
2. (b) the motor finance agreement was not cancelled;
3. (c) commission was payable (directly or indirectly) by the lender to a credit broker in connection with the entering into of the motor finance agreement;
4. (d) subject to (2), where the motor finance agreement was entered into on or after 6 April 2008, the total amount of credit did not exceed the amount specified in the second column of the table in CONRED 6.1.18R for the year in which the motor finance agreement was entered into;
5. (e) subject to CONRED 6.1.19R, the consumer has not accepted an offer of redress from the lender or the credit broker:
  1. (i) for a claim directly arising out of a motor finance agreement in (a) that falls within the subject matter of this scheme; or
  2. (ii) in full and final settlement of all potential claims in connection with the consumer’s motor finance agreement;
6. (f) the motor finance agreement in (a) has not been the subject of:
  1. (i) court proceedings where there has been a decision on the merits in relation to a claim falling within the subject matter of the scheme; or
  2. (ii) a complaint by the consumer to the Financial Ombudsman Service that falls within the subject matter of the scheme and where the merits of that complaint have been considered by the Financial Ombudsman Service; and
7. (g) the lender determines, after having regard to the rules and guidance in CONRED 6.1.20G to CONRED 6.1.24R, that if the consumer brought a claim falling within the subject matter of the scheme against the lender under section 140A of the CCA:
  1. (i) the limitation period (in England and Wales, and Northern Ireland) would not have expired before the rules creating the scheme were made; or
  2. (ii) the claim would not be precluded by a period of prescription (in Scotland).
(2) The condition in (1)(d) does not apply where the motor vehicle to which the motor finance agreement relates was constructed or adapted to enable a person with a disability to travel in the vehicle as a driver or a passenger (and ‘disability’ has the same meaning as in section 6(1) of the Equality Act 2010).
(3) For the purposes of this rule, ‘cancelled’ means that the consumer exercised a statutory or contractual right of withdrawal or cancellation within an initial notice or ‘cooling off’ period which resulted in the motor finance agreement being cancelled (including where the motor finance agreement was cancelled because the consumer exercised a right to cancel an agreement for the supply of the motor vehicle).

Table: Threshold for exclusion from being a scheme case for the purposes of CONRED 6.1.17R(1)(d).

Year	Total amount of credit
2007 (See Note)	N/A
2008 (See Note)	£38,000
2009	£39,000
2010	£43,000
2011	£45,000
2012	£47,000
2013	£51,000
2014	£56,000
[Note: Before 6 April 2008 a personal credit agreement that provided credit exceeding £25,000 fell outside the definition of a regulated agreement for the purposes of the CCA and so would not be a motor finance agreement for the purposes of the scheme. As such the exception in CONRED 6.1.17(1)(d) does not apply in respect of agreements entered into before that date.]

The condition in CONRED 6.1.17R(1)(e) does not apply if a lender or the credit broker has defaulted in its obligation to make the payment by the agreed date.

Extension of limitation periods for unfair relationship provisions: general

Pursuant to section 404(8) of the Act, a lender should conduct the assessment of limitation in CONRED 6.1.17R(1)(g) with reference to the position on 25 March 2026 (which is the day before the scheme rules were made).

Extension of limitation periods for unfair relationship provisions: England and Wales

(1) The limitation period for a claim under section 140A of the CCA seeking a monetary remedy is 6 years from the end of the credit relationship (which will normally be the end of the motor finance agreement) in England and Wales.
(2) Under section 32(1)(b) of the Limitation Act 1980, if any fact relevant to the claimant’s right of action has been deliberately concealed from them by the defendant or its agent (which may include the lender or the broker), the period of limitation will not begin to run until the claimant has discovered the concealment or could with reasonable diligence have discovered it.
(3) In an unfair relationship claim under section 140A of the CCA arising out of the inadequate disclosure of a discretionary commission arrangement, high commission arrangement and/or tied arrangement, the facts relevant to the claimant’s right of action will include the disclosure information described in CONRED 6.3.10R(1)(a) to (c) respectively.
(4) In applying section 32(1)(b) of the Limitation Act 1980, the lender must apply section 56(2) of the CCA, which deems that relevant antecedent negotiations have been conducted by the negotiator (for example, the credit broker) in the capacity of the creditor (for example, the lender) as well as in their actual capacity.
(5) Subject to (7), the fact or facts relevant to the claimant’s right of action are likely to have been deliberately concealed, and the claimant is likely to be able to show that they could not with reasonable diligence have discovered them, to the extent that the information in CONRED 6.3.10R(1)(a) to (c), as applicable, was not clearly and prominently provided in the manner described in CONRED 6.3.10R(2) to (4).
(6) It is unlikely that, where (5) applies, disclosure of the bare fact, or possibility, of commission being payable (for example, that commission ‘would’ be, ‘may’ be, ‘is’ or ‘is typically’ payable) will be sufficient for the defendant to argue either that there has not been any deliberate concealment of the facts relevant to the claimant’s right of action, or that the claimant could with reasonable diligence have discovered all such relevant facts. For example, even if there was disclosure that a commission would be paid, it is unlikely that a disclosure of this nature would, in and of itself, be sufficient to mean that there was no concealment of the fact that the credit broker was permitted to select the interest rate provided for under the motor finance agreement in a way that affected the amount of commission that would be received by the credit broker. Nor is it likely that the claimant could, with reasonable diligence, have discovered that fact based on such a disclosure.
(7) It is likely that the defendant will be able to demonstrate that the claimant could, with reasonable diligence, have discovered the facts relevant to their right of action such that the period of limitation will have begun to run from the end of the motor finance agreement (see (1)) where:
1. (a) the unfair relationship claim relates solely to a high commission arrangement; and
2. (b) there was clear and prominent disclosure, in the manner described in CONRED 6.3.10R(2) to (4), of the bare fact of, or possibility of, commission being payable (for example, that commission ‘would’ be, ‘may’ be, ‘is’ or ‘is typically’ payable), but not of the amount of commission payable to the credit broker in respect of the consumer’s agreement (ie, the amount of commission in monetary terms or the method by which the commission amount would be calculated such that the consumer was able to understand its size) (see CONRED 6.3.10R(1)(b)).
(8) In considering whether there was clear and prominent disclosure for the purposes of CONRED (5) and (7)(b), firms should have regard to CONRED 6.3.11G.

Extension of limitation periods for unfair relationship provisions: Northern Ireland

(1) The limitation period for a claim under section 140A of the CCA seeking a monetary remedy is 6 years from the end of the motor finance agreement in Northern Ireland.
(2) Under article 71(1)(b) of the Limitation (Northern Ireland) Order 1989 (SI 1989/1339 (N.I. 11)), if any fact relevant to the claimant’s right of action has been deliberately concealed from them by the defendant or its agent (which may include the lender or the credit broker), the period of limitation will not begin to run until the claimant has discovered the concealment or could with reasonable diligence have discovered it.
(3) The guidance set out in CONRED 6.1.21G(3) to (8) applies.

Prescription period in Scotland for unfair relationship claims

(1) In Scotland, time limits – referred to as prescription – applicable to bringing a legal claim are governed by the Prescription and Limitation (Scotland) Act 1973 (‘the 1973 Act’).
(2) The 1973 Act does not impose a period of prescription on an unfair relationship claim under section 140A of the CCA, or a remedy awarded pursuant to section 140B of the CCA.

Applicable law for the purposes of limitation

For the purposes of CONRED 6.1.17R(1)(g), the applicable law is:

(1) that of the UK territory where, in connection with the motor finance agreement:
1. (a) the consumer has agreed to the lender’s terms of business; and
2. (b) those terms of business include a clause providing for the application of the law of a particular UK territory (that is, England and Wales, Northern Ireland or Scotland); or
(2) (if (1) does not apply) that of the UK territory where both the lender entered into the motor finance agreement and the consumer was habitually resident at the time the motor finance agreement was entered into; or
(3) (if neither (1) nor (2) apply) that of the UK territory where the consumer was habitually resident at the time the motor finance agreement was entered into; or
(4) (if none of (1), (2) or (3) apply) that of the UK territory where the lender entered into the motor finance agreement.

Gibraltar-based firms

This chapter applies to a Gibraltar-based firm in respect of motor finance agreements falling within CONRED 6.1.6R.