You create your flat file schema using flat file schema generation wizard with the help of an instance of the flat file document. The schema looks fine, but when you try to validate the schema against an instance with repeating records it fails, there are two settings on the schema that need to be changed for the schema to work.
1. Go to the node and change the Min Occurs to 0 and Max Occurs to unbounded
2. Go to the properties of the schema find the property named Parser Optimization and change it to Complexity
Thats it, your schema will now be able to validate an instance with repeating records!