The Financial Conduct Authority (FCA) has warned UK car finance lenders not to make unfair early compensation offers. In its announcement on 3 November 2026, the regulator said customers must not receive less than they would get under its current redress scheme.
The warning comes as legal challenges hold up parts of the £9.1 billion car finance redress scheme. Some lenders now want to pay customers early instead of waiting for the courts.
Why Has the FCA Warned Car Finance Lenders?
The FCA’s scheme aims to compensate customers hit by unfair car finance commission deals. Some lenders and brokers used commission models that could push up borrowing costs. In some cases, brokers earned more when they charged higher interest rates.
The FCA expects the scheme to cost the industry £9.1 billion. About £7.5 billion should reach affected customers. Legal challenges have slowed some payments, so the FCA has set clear rules for lenders that offer early settlements.
Any early offer must be at least the maximum amount due under the current scheme rules.
Lenders must also show customers how they worked out each offer.
Why Is the £9.1bn Compensation Scheme Delayed?
Several lenders and a consumer group have challenged the scheme in court. The Upper Tribunal will hear these challenges between 16 February and 3 March 2027.
Until the legal process ends, lenders don’t have to calculate or pay compensation under the suspended parts of the scheme. They can still make voluntary settlement offers, though. No one knows yet when final payments will start.
Barclays Announces Early Compensation Offers
Barclays Partner Finance is the first major lender to announce early settlement offers. It plans to offer payments to selected customers whose complaints it acknowledged by 1 October 2026.
Barclays has set aside £430 million to cover motor finance claims. That means some customers could get paid before the legal challenges end. Not every affected customer will get an early offer, however.
What Does This Mean for Customers?
The FCA’s warning aims to stop customers from accepting less money than they should get.
Recent FCA research found that 89% of surveyed customers who had complained, or were thinking about complaining, wanted the option of early compensation. Another 77% said getting money sooner would make a real difference to their finances.
Early payments come with a big catch, though. If you accept a full and final settlement, you can’t claim more under the scheme later, even if the legal outcome raises the compensation. The FCA also says you can’t ask the Financial Ombudsman Service to review these offers.
Who Could Qualify for Compensation?
The scheme covers eligible personal motor finance agreements made between 6 April 2007 and 1 November 2024. Not every agreement qualifies, though. Business-purpose finance agreements and Personal Contract Hire agreements are excluded. Check your eligibility before you expect any payment, and if you run a small business with vehicle finance, review how those agreements are classed.
What Should Customers Do Now?
If you get an early offer, take these steps:
- Review the compensation amount and how the lender worked it out.
- Read the FCA factsheet before you accept.
- Check every settlement term carefully.
- Remember that accepting may stop you from getting more later.
- Contact your lender directly if you have concerns.
Lenders must give you at least one month to think about an offer. If you haven’t complained yet, you can contact your lender directly for free. A lump sum payout can also affect your wider tax planning and cash flow, so it’s worth thinking through before you accept.
How Can LANOP Help?
The FCA’s latest warning shows why careful money decisions matter. Early compensation can put cash in your hands fast, but you should understand the final settlement terms first.
LANOP’s Business and tax advisors can help individuals and business owners understand the financial and tax effects of their choices. For guidance on your wider financial position, contact LANOP before you make any big financial decision.
