Car finance lenders can make early compensation offers, FCA says
The FCA says lenders can pay out before the legal challenge to its scheme is heard next February, but no offer can be worth less than the scheme would pay.
Drivers owed money under the car finance compensation scheme may now be offered a settlement by their lender, rather than waiting until court challenges to the scheme are resolved. The Financial Conduct Authority (FCA) said on Tuesday that any such offer must be at least as much as the scheme would pay, and nobody has to accept one.
Payouts under the scheme had been due to begin this year. It is partly suspended while legal challenges are heard between 16 February and 3 March 2027. If the scheme is upheld and the judgment is not appealed, the FCA expects payments to start in 2027.
Accepting or turning down an offer
If you accept, you keep the money even if the court outcome would have given you less. The flip side is that you cannot go back and claim more if the outcome would have given you more.
You can turn an offer down and leave your claim to be handled under the scheme. Because of that, early offers cannot be taken to the Financial Ombudsman Service for review.
Lenders making offers must give customers an FCA factsheet explaining their choice.
Lenders making offers
Not every lender is likely to make offers, and those that do may only approach some of the customers they owe.
To help people check that an offer is genuine, the regulator will keep a list on its website of lenders that are making them. Firms are expected to tell the FCA before they start.
Eligibility
The scheme is for people who used finance to buy a car, motorbike or van between 6 April 2007 and 1 November 2024. The FCA estimates that 37% of agreements from that period, around 12.1 million, are eligible, with an average payout of around £830 per agreement.
If you have not complained yet
The FCA said anyone worried about a car finance deal who has not yet complained should go straight to their lender, which costs nothing. It warned that law firms and claims management companies may take up to 36% of any compensation, including VAT.
In a survey carried out for the FCA, 89% of those who had complained or were thinking of doing so said they wanted the option of an offer now rather than waiting.
