FCA sets expectations for firms making car finance settlement offers
AI Analysis
The FCA has set minimum expectations for lenders that voluntarily make early settlement offers to consumers affected by motor-finance commission arrangements while legal challenges to the motor finance compensation scheme remain unresolved. Offers should be no less favourable than the maximum compensation available under the scheme, and firms must explain that acceptance is a full and final settlement with no later claim for additional compensation; Barclays Partner Finance is the first lender identified as making such offers.
Key dates
- 2026-11-02
- The FCA published its expectations for lenders making voluntary motor finance settlement offers; the page was updated on 2026-11-03.
- 2026-10-01
- Barclays Partner Finance identified customers whose complaints had been acknowledged on or before this date as a cohort for some early settlement offers.
- 2027-02-16
- The scheduled start of the legal challenges to the FCA motor finance compensation scheme.
- 2027-03-03
- The scheduled end date of the hearing window for the legal challenges to the FCA motor finance compensation scheme.
Suggested considerations
- Firms considering early settlements should assess each offer against the maximum redress that would have been available under the FCA motor finance compensation scheme, rather than using a lower discretionary amount.
- Compliance teams may wish to establish governance and second-line review for the methodology, calculations, customer segmentation and approval of settlement communications.
- Firms should consider notifying the FCA before making offers and supplying the FCA factsheet with each customer communication.
- Offer letters should clearly state the amount, calculation basis, the full-and-final effect of acceptance, the inability to claim more later, the option to reject and remain within the scheme, and the consequences for the existing complaint.
- Firms should consider allowing at least one month for customers to respond and retaining evidence that customers had sufficient information and time to make an informed decision.
- Marketing, customer-service and complaints teams should avoid language suggesting FCA endorsement, approval or validation of an individual offer.
- Firms should consider controls to prevent accepted settlements from being subsequently processed as scheme claims or referred to the Financial Ombudsman Service.
- Motor finance lenders should continue preparing for the compensation scheme and progress complaints as far as possible during the partial suspension, even if scheme compensation is not currently calculated or paid.
What changed
Lenders may make voluntary settlement offers before the partially suspended FCA motor finance compensation scheme is implemented, but the FCA expects each offer to provide at least the compensation the customer would receive under the scheme, calculated by reference to the relevant agreement and the scheme methodology. Firms intending to make offers are expected to notify the FCA, provide the FCA factsheet to customers, and ensure communications are clear, fair and not misleading. Offer communications should explain that customers may reject the offer and wait for the scheme, that accepted money may be retained even if the legal outcome would have produced a lower payment, and that customers cannot seek additional compensation later if the legal outcome would have produced a higher payment
Compliance impact
The publication is guidance and supervisory expectation rather than a new binding compensation rule, but it creates a significant conduct-risk benchmark for any lender making voluntary offers. The FCA can monitor firms' practices, and inadequate calculations or unclear communications could create foreseeable Consumer Duty, complaint-handling, unfair-treatment and litigation exposure, particularly
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original FCA source before acting. Full disclaimer.
What the FCA said
Research shows consumers want the choice, rather than wait for the legal challenges to conclude. Almost 9 out of 10 (89%) car finance customers who have complained or are considering doing so want the choice of an offer of compensation now, rather than waiting for the legal challenges to the FCA's compensation scheme…
Extract from FCA . Read the full notice at the source for the authoritative text.