FCA sets rules for car finance settlement offers while scheme faces legal challenge

The FCA said on Tuesday it backs lenders making car finance settlement offers, provided customers receive no less than its compensation scheme would pay.

Barclays Partner Finance has confirmed it will make offers to some customers owed compensation, while legal challenges keep the scheme partly suspended.

Customers who use a law firm or claims company may pay up to 36% of any compensation in fees, including VAT, the regulator said.

Complaints made directly to a lender are free, and the FCA said there is no need to use a representative.

Stephen Braviner Roman, the FCA’s general counsel, said: “Anyone who wants to wait can, and there’s no obligation to agree to the offer.”

A Kantar poll of 590 people who had complained or were considering it found 89% want the choice of an offer now.

Of those respondents, 61% said they would accept an offer in line with the scheme, and 77% said earlier payment would matter to their finances.

Accepting is full and final: the customer keeps the money even if the legal outcome would have paid less, but cannot claim more later.

The FCA said the complaint is then treated as withdrawn, the offer cannot go to the Financial Ombudsman Service and a repeat complaint is unlikely.

Accepting a full and final offer could also affect a customer’s ability to take the matter to court, the regulator said.

The FCA said the offer should explain how compensation was calculated, including caps and any set-off against payments still owed on the loan.

The FCA expects offer letters to give customers at least one month to respond and not to imply it has approved the specific offer.

Letters should also state that the offer is at least equal to the maximum redress available under the scheme and show how that was ensured.

The FCA will list on its website which lenders are making offers, so customers can check an offer is genuine.

Firms are expected to tell the FCA before they make offers, and not every lender is likely to make them.

People who bought a car, motorbike or van between 6 April 2007 and 1 November 2024 may be owed compensation, the FCA said.

The scheme is partly suspended pending legal challenges due to be heard by the Upper Tribunal from 16 February to 3 March 2027.

Firms need not calculate or pay compensation under the scheme until that legal process concludes, though they must keep preparing and progress complaints where possible.

The FCA expects payments in 2027 if the scheme is upheld and not appealed, but an appeal or overturning could mean 2028 or later.

The FCA has said the scheme will return £7.5bn to customers, with the vast majority of claims settled by the end of 2027.