Motor finance lenders may now offer customers compensation before the legal challenges to the FCA's redress scheme are decided. On 3 November 2026 the FCA set out its minimum expectations for these full and final settlement offers. The core condition is simple: the offer must be no less than the maximum the customer could receive under the scheme. The rest of the expectations are about making sure the customer understands that accepting is final, whatever the Upper Tribunal later decides. Barclays Partner Finance has confirmed it will make offers to some customers.
Where the scheme stands
The FCA confirmed its motor finance redress scheme in March 2026. It covers agreements taken out between 6 April 2007 and 1 November 2024. Three lenders, Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance, and Consumer Voice, represented by Courmacs Legal, challenged it. On 2 July 2026 the Upper Tribunal suspended parts of the scheme on agreed terms.
| Date | Event |
|---|---|
| March 2026 | Redress scheme launched |
| 2 July 2026 | Upper Tribunal partially suspends the scheme |
| 26 October 2026 | Hearing dates set at 16 February to 3 March 2027 |
| 3 November 2026 | FCA sets expectations for settlement offers |
| 16 February to 3 March 2027 | Upper Tribunal hears the challenges |
| 2027 or later | Judgment; scheme payments expected in 2027 if upheld without appeal, possibly 2028 or later otherwise |
During the suspension, lenders do not have to calculate or pay redress under the scheme. They must still identify relevant complaints and agreements, gather commission and disclosure data, and tell complainants who are not owed compensation, subject to limited exceptions. Our guide to motor finance redress readiness covers those continuing duties.
Why the FCA supports early offers
The FCA published research alongside its expectations. Of car finance customers who have complained or are considering it, 89% said they want the choice of an offer now rather than waiting, 86% said they would be comfortable deciding, and 61% said they would accept an offer in line with the scheme. Most said receiving money sooner would make a real difference to their finances.
The FCA's position is that fair settlement offers can get money to people sooner, provided no one is pressured and the terms are clear.
The amount: no less than the scheme
The FCA expects that a complaint will ordinarily be treated as withdrawn when a customer voluntarily accepts a settlement offer after receiving appropriate information. That only holds if the lender can show the offer reflects no less than the maximum redress available under the scheme: the amount calculated for that customer using the scheme methodology, including relevant adjustments and caps.
The appendix to the offer letter must set out:
- the type of arrangement identified and investigated;
- the basis on which the lender found liability;
- the amount of redress and how it was calculated, including any set-off, caps, compensatory interest and income tax deduction;
- a clear demonstration that the offer is no less than the maximum redress available under CONRED 5/6.4.
The FCA points lenders to CONRED 5/6 Annex 2, which sets the contents of a provisional redress decision, as a guide. That annex is currently suspended, but it shows the level of detail expected.
What the offer letter must say
| Requirement | Detail |
|---|---|
| No FCA endorsement | The letter must not suggest the FCA approved the offer and must say the FCA has not reviewed individual offers |
| Time to respond | At least one month |
| Context | The scheme, its partial suspension and the legal challenge |
| Amount | That the offer is at least the maximum redress available under the scheme |
| FAQs | Signposting to the FCA's FAQ sheet, which lenders must share with every offer |
| Choice | The customer can accept now or wait for the legal outcome |
| Final either way | The challenge could lead to an amended scheme or no scheme, with more or less redress, but neither side can claim the difference |
| Ombudsman | The customer cannot refer the offer or the underlying complaint to the Financial Ombudsman at this stage |
| Full and final | Accepting settles everything within the current scheme and the complaint is ordinarily treated as withdrawn |
| Mixed complaints | Non-scheme points, such as GAP insurance or affordability, are answered separately or within one month of acceptance |
| Advice | Encouragement to seek clarification or advice if the customer does not understand the offer |
The FCA's FAQ sheet tells customers they can accept, wait, or bring a claim in the county court. It also warns that accepting could affect court proceedings, and that if they wait, the Ombudsman can review the outcome of their complaint later.
Notifying the FCA and avoiding scams
The FCA expects lenders to tell it before making offers, and it will publish and update a list of lenders making settlement offers so that customers can check an offer is genuine. Lenders should coordinate their communications with that list, use recognisable channels and warn customers about fraudsters copying offer letters.
The FCA will monitor firms making offers closely. Lenders should keep evidence of every offer, the calculation behind it, the letter sent and the response, because those records will be the basis of any review.
Consumer Duty and fair treatment
Settlement offers sit within the Consumer Duty. The consumer understanding outcome means the letter must be clear and tested for comprehension, especially the full and final point. The consumer support outcome means customers must be able to ask questions and get answers without barriers. Lenders should also consider customers in vulnerable circumstances, who may need more time or different formats.
Claims management companies and law firms acting for customers add another layer. Lenders should have a process for sending offers to authorised representatives where the customer has appointed one, and for checking the representative's authority. Our guide to consumer credit complaints and redress covers the DISP framework these offers sit alongside.
Duties that continue alongside offers
Settlement offers sit on top of the scheme rules that remain in force; they do not replace them. While the legal challenge runs, lenders must still identify relevant complaints and agreements, gather the data needed to identify commission arrangements and disclosure practices, including data held by brokers, and respond to complainants who are not owed compensation by the relevant scheme deadlines, subject to limited exceptions. They must also give the outcome of non-scheme parts of mixed complaints.
The FCA has also told lenders to plan for the possibility that the scheme, or parts of it, are quashed, leaving no scheme and no complaint handling pause. In that case lenders would need to resolve complaints through ordinary complaint handling within the usual statutory timescales. That means financial provisions agreed with auditors and the operational capacity to handle volumes quickly. A settlement programme can reduce that exposure, but only for the customers who accept.
Running a settlement programme
A settlement programme is a remediation exercise in its own right. The sequence below reflects the FCA's expectations and the controls a lender will need to evidence.
| Stage | Key controls |
|---|---|
| Scope | Select agreements and customers, document the rationale and confirm data completeness |
| Calculate | Apply the scheme methodology, caps, set-off, interest and tax; quality-assure a sample of every batch |
| Approve | Board or committee sign-off of methodology, letter templates and the demonstration that offers meet the scheme maximum |
| Notify | Tell the FCA before offers go out |
| Issue | Send letters with the FCA FAQ sheet and at least one month to respond; route to authorised representatives where appointed |
| Support | Train call handlers on the full and final point and on what the Ombudsman can and cannot do |
| Pay and close | Pay accepted offers promptly; treat the scheme complaint as withdrawn; answer non-scheme points within one month |
| Monitor | Track acceptance, queries, complaints about offers and vulnerable customer outcomes; report to the board |
Common pitfalls
- Rounding down. Any calculation step that reduces the figure below the scheme maximum, such as an incorrect cap or interest date, undermines the whole offer.
- Pressure. Deadlines shorter than a month, or wording that suggests the customer must decide quickly, conflict with the FCA's expectations.
- Implied approval. Phrases that suggest the FCA endorsed the offer are prohibited.
- Missing the mixed complaint. Settling the commission element while leaving GAP insurance or affordability points unanswered.
- Weak records. Being unable to show, for a given customer, how the figure was reached and why it met the scheme maximum.
Deciding whether to make offers
A lender weighing offers should consider:
- Accuracy. Can the lender calculate scheme redress reliably for the agreements in question, with commission and disclosure data in hand?
- Selection. Which agreements to offer on, and whether the selection is fair and documented.
- Provisioning. Offers paid now remove uncertainty but cannot be recovered if the scheme is reduced.
- Operations. Letters, call handling, payments and tracking at volume, including mixed complaints.
- Governance. Board approval of the methodology and quality assurance of each calculation.
Lenders that decide not to make offers must still plan for every outcome of the hearing, including a scenario with no scheme in which complaints return to normal handling and statutory deadlines. Our Consumer Duty and compliance audit services support lenders with the methodology, letters and testing.