The Financial Conduct Authority says the vast majority of consumers who’re complaining about historic car finance agreements would like the choice of an offer of compensation now rather than wait for the end of legal challenges to the FCA redress scheme.
The regulator has released its expectations for lenders who want to make early settlement offers to people who expect compensation under its redress scheme as the court battles continue. It confirmed that one lender, Barclays Partner Finance, will make some early offers.
Barclays Partner Finance will offer optional early settlement to some of its customers whose complaints were acknowledged on or before 1 October 2026, giving them the option of receiving redress sooner.
Read more about the FCA’s redress scheme and the legal challenges here
The FCA said it supports settlement offers providing they offer no less than the redress scheme would provide. From research of 590 respondents who said they had made, or were considering, a motor finance complaint, the FCA said that for three in four complainants receiving compensation sooner would make a difference to their financial situation.
Payouts delayed by legal challenges
Payouts under the motor finance compensation scheme were due to start this year. The scheme is currently partially suspended, pending the outcome of legal challenges involving Volkwagen Financial Services, Mercedes-Benz Financial Services and CA Auto Finance now due to be heard in 2027 between February 16 and March 3 – a full week longer than initially anticipated. Some industry experts believe this means any redress scheme would not begin until the latter half of 2027.
Under the partial suspension, firms must keep preparing for the scheme and continue progressing complaints as far as possible, but do not need to calculate or pay compensation under the scheme until the legal process concludes.
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.”
He added that the FCA will “closely monitor firms making offers” and expect them to be clear what accepting an offer means.
Dilemma for lenders
In response, the Finance and Leasing Association (FLA) trade body for lenders said it is understandable that some firms may choose to make settlement offers before the legal process has concluded, and it welcomes consumers receiving compensation as soon as possible in such circumstances.
“However, settlement in some cases does not remove the dilemma facing lenders. On the one hand, delaying payments until the legal issues are resolved means customers who have suffered harm may have to wait longer for redress.
“On the other hand, rushing to settlement risks consumers receiving an outcome that may not reflect the final position once the ongoing legal challenges have been determined.
“The FLA wants to see consumers receive the fairest outcome in as timely a way as possible and recognises that, in some cases, that may point to early settlement, while in others it may be appropriate to await greater legal certainty.”
The FCA confirmed on October 26 that the Upper Tribunal has extended the legal challenge hearing from February 16 to 26 to 16 February 16 to March 3, following a further case management hearing. New directions also set evidence deadlines: Mercedes-Benz Financial Services must file its economic report by 13 November, with VWFS and CA Auto Finance following by 27 November.
VWFS has set aside more than £700 million for redress payments, which has pushed it into a loss.