Motorists offered early car finance compensation should not have to accept less money simply because they want their complaint settled sooner.

The Financial Conduct Authority (FCA) has published new expectations for lenders planning to compensate customers before the legal challenges to its wider motor finance scheme are resolved.

Announced on 3 November 2026, the guidance sets out how lenders should calculate compensation, explain their offers and give customers enough time to decide whether to accept [1].

The regulator expects early settlement offers to be worth at least as much as the individual customer would receive under its current compensation scheme.

Customers must also have at least one month to consider an offer.

The announcement comes as Barclays Partner Finance confirms plans to begin offering settlements to selected customers with historic motor finance commission complaints.

However, receiving early car finance payouts comes with an important condition. Once a customer accepts a full and final settlement, they generally cannot claim additional money for the same commission matters if the scheme later becomes more generous.

Why has the FCA issued new guidance on mis-sold car finance settlement offers?

The FCA introduced its Motor Finance Consumer Redress Scheme in March 2026 [2] to compensate customers affected by certain unfair commission arrangements.

However, legal challenges brought by three lenders and Consumer Voice led to parts of the scheme being suspended in July [3].

Since then, motorists have continued waiting for clarity over compensation, with the main Upper Tribunal hearing now scheduled for February and March 2027 [4].

Some lenders have started considering whether they can settle complaints earlier rather than wait for the legal proceedings to finish.

The FCA supports this approach, provided customers receive fair offers and understand what accepting them means.

The regulator is particularly concerned about customers agreeing to a smaller amount without knowing how the lender reached that figure or what rights they may be giving up.

Its guidance published on 3 November explains what lenders are expected to include when offering compensation before the wider scheme resumes [5].

These expectations apply to voluntary settlements. They do not require every lender to start making payments.

How much should lenders offer in FCA car finance compensation 2027?

The FCA expects lenders to offer at least the maximum amount the individual customer would receive under the existing scheme's calculation rules.

That does not mean every customer should receive the same amount.

The regulator estimates average car finance compensation of approximately £829 per eligible agreement [6], but individual payments will depend on the circumstances of the finance.

For example, one motorist may have paid a higher interest rate because of a discretionary commission arrangement. Another may have had a different arrangement involving a large commission that was not properly disclosed.

Even where both agreements qualify, their compensation calculations may differ.

The lender must consider the relevant scheme rules, including any caps or adjustments, before deciding what to offer.

It should then explain how the amount was reached.

This includes the commission arrangement identified, the basis for compensation, any compensatory interest and relevant deductions.

The FCA also expects lenders to show how the offer meets its minimum compensation expectations.

Importantly, the FCA has not approved or checked individual settlement offers.

That responsibility remains with the lender.

Customers should therefore be able to understand the calculation rather than being asked to accept an unexplained figure.

Why does the FCA want customers to have at least one month to decide?

Receiving an unexpected compensation offer could be welcome news, particularly for someone who has been waiting months for an answer.

However, accepting an early settlement could affect what happens to their complaint later.

The FCA wants customers to have time to understand those consequences.

Lenders are expected to allow at least one month for a response, giving motorists an opportunity to review the amount and ask questions before making a decision.

The offer must also be accompanied by the FCA's consumer information sheet.

This explains why early settlements are being considered while the wider scheme remains suspended and what customers should know about their choices.

Someone who receives an offer does not have to accept it.

They can choose to wait for the outcome of the legal challenges instead.

However, waiting does not necessarily mean receiving more compensation.

The eventual outcome remains uncertain, including whether the current scheme will continue in its existing form.

What happens if you accept an early settlement?

The main benefit is the possibility of receiving compensation sooner.

Instead of waiting for the Tribunal's judgment and the next stage of the FCA scheme, an eligible customer can agree to settle their complaint directly with the lender.

However, an early offer will usually be made as a full and final settlement.

This means the customer agrees to resolve the commission matters covered by the offer.

If the legal challenges eventually lead to higher compensation calculations, they will not be able to claim the additional amount for those settled matters.

On the other hand, if the final outcome would have resulted in a smaller payment, the customer keeps the money they have already received.

The FCA expects lenders to explain both possibilities clearly.

For example, someone who accepts £1,000 now would ordinarily keep that amount even if the final scheme would have awarded less.

But if the same agreement would later qualify for £1,300, they would not be entitled to claim the additional £300 for the matters already settled.

This example is illustrative rather than a prediction of how compensation amounts will change.

For motorists considering an early car finance refund, understanding this trade off is particularly important.

What if you decide to reject the offer?

Customers are free to decline an early settlement.

If they do, their complaint can remain unresolved while the legal proceedings continue.

The lender will still need to deal with the complaint under the applicable arrangements, although the timing remains uncertain.

There is no guarantee that waiting will result in a higher payment.

The Tribunal could uphold the existing scheme, require changes or reach a decision that prevents the current framework from proceeding as planned.

That uncertainty works both ways.

A customer who rejects an offer may eventually receive more compensation, but they could also receive less or find that no payment is available under a mandatory scheme.

The FCA wants lenders to explain these possibilities without pressuring customers towards either decision.

What if your complaint covers more than commission?

Some motorists have complained about several aspects of their finance agreement.

For example, a customer may believe that commission was not properly disclosed while also raising concerns about affordability or GAP insurance.

These are not necessarily the same type of complaint.

The new guidance makes clear that lenders must distinguish between matters covered by the FCA motor finance redress scheme and concerns that fall outside it.

An early settlement should only resolve the relevant commission issues.

If a customer has also complained about another matter, the lender should explain what will happen to that part of the complaint.

It must either have responded separately already or provide a response within one month of the customer accepting the settlement.

For consumers, this means an offer relating to undisclosed commission should not automatically close an unrelated complaint about affordability or another financial product.

Before accepting, customers should check which concerns are being settled and whether anything remains outstanding.

Can the Financial Ombudsman review an early settlement offer?

The FCA has confirmed that these voluntary settlement offers cannot currently be referred to the Financial Ombudsman Service for review.

Customers who reject an offer also cannot, at this stage, ask the Ombudsman to review the underlying complaint covered by the scheme.

This is because the wider compensation arrangements remain affected by the legal challenges and partial suspension.

However, complaints outside the scope of the scheme may still follow the usual complaint handling process, subject to the relevant rules.

Customers should understand this distinction before deciding what to do.

If the amount offered seems unclear or the terms are difficult to understand, they can ask their lender for further information or seek independent advice.

Why does the FCA believe motorists want early compensation?

Alongside its new guidance, the FCA released research examining how consumers feel about receiving compensation before the legal challenges are resolved.

The findings suggest that many motorists would welcome having a choice.

In a survey conducted in June 2026, 89% of respondents who had complained or were considering complaining said they wanted the option of receiving compensation earlier.

Another 86% said they would feel comfortable making a decision about an offer.

The research also found that 77% believed an earlier payment would make a meaningful difference to their financial situation.

Meanwhile, 61% said they would accept compensation calculated in line with the FCA's existing scheme.

The findings came from 590 respondents who had complained or were considering doing so, within a wider survey of 1,000 motor finance customers.

These figures reflect people's stated preferences. They do not show how many customers will actually accept settlement offers.

Nevertheless, the research helps explain why the FCA supports giving consumers the option of receiving money sooner.

Which lenders are offering early car finance compensation?

Barclays Partner Finance is the first lender publicly identified by the FCA as planning to make voluntary settlement offers [7].

The bank confirmed its plans on 3 November 2026, ahead of this article's publication.

Barclays intends to contact selected customers who previously complained about historic motor finance commission arrangements.

However, not every Barclays customer will receive an offer.

The arrangements initially concern customers whose complaints meet the bank's criteria for early settlement.

For more information about eligibility, the expected payment timetable and what Barclays customers should consider, see our Barclays car finance claims guide.

Other lenders may decide to offer compensation before the Tribunal reaches its judgment, but they are not required to do so.

The FCA has asked firms planning early settlements to notify the regulator.

It will also maintain information about participating lenders on its website.

This should help consumers check whether a lender is genuinely making offers, particularly if they receive an unexpected message about compensation.

Does the new FCA guidance mean the compensation scheme has restarted?

No. The wider Motor Finance Consumer Redress Scheme remains partially suspended.

The legal challenges are being brought by Volkswagen Financial Services, Mercedes Benz Financial Services, Crédit Agricole Auto Finance and Consumer Voice.

The lenders and Consumer Voice have raised different objections to the FCA's scheme, including aspects of its approach to assessing consumer harm and calculating compensation.

The Upper Tribunal has not yet ruled on those challenges.

The substantive hearing is scheduled to take place from 16 February to 3 March 2027.

A judgment is expected in the following months, although there is no confirmed date for compensation payments under the wider scheme.

Lenders must continue preparing and follow the obligations that remain in force.

However, they are not currently required to calculate or pay compensation under the suspended provisions.

Voluntary settlements provide a separate way for some complaints to be resolved before that process concludes.

For most motorists involved in the car finance scandal, the wider compensation timetable remains uncertain.

What should motorists check before accepting an offer?

An early compensation offer can feel like good news, especially if you have been waiting months for an update. Still, read the details before you decide whether to accept.

Check which finance agreement the offer covers and how the lender calculated the amount. That should include any compensatory interest, plus any deductions or limits they applied.

Make sure you also know what you are agreeing to settle. If your complaint covers more than one issue, the lender should say which matters will be closed and whether anything else still needs looking into.

If you have appointed a solicitor or claims management company, speak to them before you accept. Your agreement may require you to notify them, and there may be fees to pay.

If you are unsure about the amount or the settlement terms, ask your lender to explain them before you decide.

Check that the offer is genuine too. The FCA publishes details of lenders making early settlement offers, which can help you confirm whether your lender is taking part [8].

If you get an unexpected call, email or text about compensation, contact your lender directly using the details on its official website. Do not rely on links or phone numbers in messages you were not expecting.

Can motorists still make car finance claims?

Yes. The new settlement guidance does not prevent consumers from complaining about potentially unfair historic commission arrangements.

Anyone concerned about car finance mis-selling can still contact their lender directly for free.

Motorists who no longer have their original finance paperwork may be able to identify previous agreements using bank statements, credit records or correspondence from the lender.

A car finance refund check may also help identify agreements worth reviewing.

This also applies to some Personal Contract Purchase (PCP) agreements, although having PCP finance does not automatically mean you're owed compensation or eligible for PCP claims.

You can make a car finance claim yourself or get help from an FCA regulated claims management company or solicitor. If you choose professional help, check the fees and terms before signing up.

You can also complain now rather than wait for the legal challenges to finish. Just bear in mind that submitting a complaint does not mean you'll receive an early offer or get paid any sooner.

However, consumers do not need to wait for the Tribunal hearing before investigating whether they may have grounds for a claim.

What happens next?

The FCA's latest announcement gives lenders a clearer framework for offering compensation while the wider scheme remains partially suspended.

It also gives motorists more information about what they should expect before agreeing to a settlement.

However, the guidance does not mean every lender will begin paying customers early.

For now, Barclays Partner Finance is the lender publicly identified by the FCA as making such offers.

Other lenders may follow, although the decision remains voluntary.

Customers who receive an offer will need to consider whether they would prefer a known amount now or wait for the outcome of the legal challenges.

Neither choice guarantees a better financial result.

For those who do not receive an offer, the wider scheme remains relevant.

The Tribunal hearing will take place between 16 February and 3 March 2027, with the judgment expected afterwards.

Until then, motorists can continue checking historic finance agreements and pursuing complaints where appropriate.

Frequently asked questions

How much should an early car finance compensation offer be?

The FCA expects an offer to be at least equal to the maximum compensation the individual customer would receive under the current scheme calculation, including relevant caps and adjustments.

How long do I have to consider an early settlement?

Lenders should give customers at least one month to review an offer and decide whether to accept it.

Can I reject an early compensation offer?

Yes. You can decline an offer and wait for the wider legal challenges to be resolved. However, there is no guarantee that waiting will result in a larger payment.

If I accept an early offer, can I claim further compensation later?

When you accept a full and final settlement you waive your right to any further compensation in relation to the commission matters which that settlement covers. This means that even if the final scheme is improved you will still be barred from claiming any further compensation.

Has the FCA approved my compensation offer?

No. The FCA has set expectations for lenders but has not checked or approved individual settlement offers.

Can the Financial Ombudsman review an early offer?

Not currently. The FCA says voluntary settlement offers and the underlying complaints covered by the scheme cannot be referred to the Financial Ombudsman Service for review at this stage.

Are other lenders required to offer early compensation?

No. The arrangements are voluntary. Some lenders may choose to settle selected complaints early, while others may wait for the Tribunal's judgment.

Can I still make a car finance claim?

Yes. Consumers can still complain directly to their lender for free about potentially unfair historic motor finance commission arrangements.

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References:

1. Announced on 3 November 2026, the guidance sets out how lenders should calculate compensation, explain their offers and give customers enough time to decide whether to accept - https://www.fca.org.uk/news/press-releases/fca-sets-expectations-firms-making-car-finance-settlement-offers
2. The FCA introduced its Motor Finance Consumer Redress Scheme in March 2026 - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
3. legal challenges brought by three lenders and Consumer Voice led to parts of the scheme being suspended in July - https://www.fca.org.uk/news/statements/motor-finance-scheme-partially-suspended
4. the main Upper Tribunal hearing now scheduled for February and March 2027 - https://www.fca.org.uk/news/statements/motor-finance-legal-challenge-be-heard-february-2027
5. Its guidance published on 3 November explains what lenders are expected to include when offering compensation before the wider scheme resumes - https://www.fca.org.uk/firms/information-firms-motor-finance-complaints/settlement-offers
6. The regulator estimates average car finance compensation of approximately £829 per eligible agreement - https://www.fca.org.uk/publication/policy/ps26-3.pdf
7. Barclays Partner Finance is the first lender publicly identified by the FCA as planning to make voluntary settlement offers - https://news.sky.com/story/barclays-to-begin-car-finance-payouts-months-before-outcome-of-legal-challenge-13607016
8. The FCA publishes details of lenders making early settlement offers, which can help you confirm whether your lender is taking part - https://www.fca.org.uk/consumers/car-finance-complaints