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The Financial Conduct Authority (FCA) has set out its expectations for lenders choosing to make early settlement offers to customers while legal challenges to the motor finance redress scheme continue.
The FCA supports voluntary settlement offers, provided customers receive no less compensation than they would be entitled to under the scheme. Lenders considering this approach should notify the FCA of their plans and provide customers with its consumer factsheet explaining how settlement offers work.
Firms must clearly explain how compensation has been calculated, including any caps or deductions for outstanding loan payments. Customers must also understand that accepting an offer represents a full and final settlement. They will keep the payment even if the outcome of the legal challenges would have resulted in less compensation but cannot claim additional compensation if they would otherwise have been entitled to more.
Customers can reject an offer and wait for their complaint to be resolved. The FCA has also clarified that these voluntary settlement offers cannot be referred to the Financial Ombudsman Service (FOS) for review.
The guidance is particularly relevant to lender members considering early settlements, while leasing broker members may also receive questions from customers. Not all lenders will make offers, and some may only approach selected customers. Firms should continue preparing for the redress scheme and progressing complaints as far as possible during the partial suspension, with legal challenges scheduled to be heard between 16 February and 3 March 2027.
Members are encouraged to read the FCA's announcement and consumer factsheet on settlement offers. Questions or practical concerns can be directed to James Vickery.
