FCA Sets Terms for Early Car Finance Compensation Offers

The UK Financial Conduct Authority (FCA) set minimum expectations on November 3, 2026 for lenders making voluntary car finance settlement offers, including that compensation be no less than the maximum redress available to each customer under its partially suspended scheme.

Barclays Partner Finance has confirmed it will make offers to some customers owed compensation and is the only lender on the FCA’s current list of participating firms. Lenders are not required to make offers and may limit them to some eligible customers. Firms planning to participate are expected to notify the FCA, which will regularly update its list to help consumers check whether an offer is genuine.

The framework does not lift the scheme’s partial suspension. Payouts had been due to begin in 2026, but the motor finance redress legal challenges are scheduled to be heard between February 16 and March 3, 2027. Lenders must continue preparing for the scheme and progressing complaints as far as possible, but need not calculate or pay scheme compensation until the legal process concludes.

The potential scale is substantial. The scheme concerns qualifying vehicle-finance agreements from April 6, 2007 through November 1, 2024. The FCA estimates that 37% of agreements from that period, around 12.1 million, are eligible and that compensated customers will receive an average of around £830 per agreement.

Settlement Terms and Finality

The minimum expectations for offer letters call for customers to have at least one month to respond. Letters should not suggest that the FCA has approved or reviewed an individual offer. An appendix should identify the arrangements investigated and the basis of liability, then show the redress calculation, including any set-off, caps, compensatory interest and income-tax deduction.

Accepting a full-and-final offer settles all matters within the current scheme’s scope, and the related complaint will ordinarily be treated as withdrawn. The customer keeps the payment even if the litigation ultimately produces a lower entitlement or none, but cannot claim more if the outcome produces a higher one. Consumers can reject an offer and wait for the legal process, but cannot refer the settlement offer itself to the Financial Ombudsman Service.

For mixed complaints, the settlement addresses only the scheme element. Other issues, such as GAP insurance or affordability, must be answered separately or within one month of acceptance.

Lenders must also provide the FCA’s consumer factsheet. It says scheme payments could begin in 2027 if the scheme is upheld and the judgment is not appealed. An appeal, or the scheme being overturned in whole or part, could delay compensation until 2028 or later.

Survey Supports Earlier Payment Choice

Kantar surveyed 1,000 motor finance customers online from June 25 to 28, 2026. The published findings cover a subset of 590 respondents who had complained or were considering doing so. Among them, 89% wanted the choice of an offer now, 86% would be comfortable making that decision, and 61% said they would accept an offer in line with the scheme. Another 77% said receiving compensation sooner would make a great deal or fair amount of difference to their financial situation.

Stephen Braviner Roman, the FCA’s general counsel and co-lead on the motor finance project, said: “Fair settlement offers could result in some people getting money sooner. And it’s clear they want the choice.” The FCA will closely monitor firms making offers.

The framework’s immediate reach depends on how many lenders voluntarily participate. For customers who receive an offer, the unresolved litigation makes acceptance consequential: it can bring compensation forward, but the payment becomes final before the courts determine whether the scheme will change.