Car finance settlement offers: settle during the pause, or wait for the scheme?
The short answer: yes, you can make car finance settlement offers while the motor finance redress scheme is partly paused, as long as the customer is offered no less than they would receive through the scheme, and the FCA expects you to notify it if you plan to make offers. The regulator set this out on 3 November 2026. The real question for a finance team is not whether you are allowed, it is whether you should, and what an early settlement does to your provisions, your P&L and your month-end close. That is a finance decision as much as a legal one.
Car finance settlement offers: what the FCA will let you do
The redress scheme is partially suspended while legal challenges play out, and those legal challenges are due to be heard between 16 February and 3 March 2027. Until the legal process concludes, you do not need to calculate or pay compensation under the scheme. So nothing forces your hand before the spring.
What the FCA added is a route to settle early. You can make a settlement offer now, as long as customers are offered no less than they would receive through the scheme, and firms are expected to notify the FCA if they plan to make offers. You also have to be clear with people about what accepting an offer means, because for the customer it is a decision they cannot easily undo.
There is clear appetite on the customer side. In the FCA's research, almost 9 out of 10 (89%) car finance customers who have complained or are considering doing so want the choice, and 77% say receiving compensation sooner would make a great deal or fair amount of difference. There is a cost angle for them too: a claims management company may charge up to 36% of any compensation, including VAT, so a direct offer can leave the customer better off than a managed claim.
For scale, the scheme covers 12.1 million agreements made between 2007 and 2024. The FCA estimates that 75% of eligible consumers will make a claim, and if so total redress paid would be £7.5bn, with the average payout at around £830 per agreement. Treat those as planning anchors, not your number: your book's mix of commission types and vintages decides your own exposure.
Take the P&L check: 10 questions, about 3 minutes, and see how much AI could move your P&L.
What car finance settlement offers do to your motor finance provisions
If you are in scope, you are almost certainly already carrying a provision for this. The pause does not remove the obligation, it just defers the cash. So the decision to settle early is really a decision about timing and certainty, not about whether you owe.
Settle now and you convert an estimate into cash. You cap your per-case cost at the scheme floor, you take Ombudsman and court handling out of the picture, and you close the file. Wait, and you keep the cash for longer, but you keep the uncertainty too: the provision stays an estimate, it stays sensitive to every assumption (take-up, average payout, how many cases cap, etc.), and it keeps moving at every close until the number settles.
The awkward part is the legal challenge itself. If the courts narrow the scope, some of the cases you settle now might have cost you less, or nothing, under the final rules. That is the trade you are pricing: certainty and goodwill today against the chance the obligation shrinks later. I would not treat that as one firm-wide answer. It is a per-cohort call, because the risk looks different for an early vintage than for a recent one, and your provision should already be built that way.
Motor finance provisions and the month-end close: what to get ready
Whatever you decide, the finance work is the same shape. A few things I would have in place before you make a single offer:
- Tie the provision to the book at agreement level, not a single top-down figure. If you cannot explain the number by cohort, you cannot defend it to audit or move it quickly when an assumption changes.
- Model the two paths side by side, per cohort: settle now versus wait for the scheme. Use your own payout distribution, not the around £830 average, and show the P&L and the cash timing of each.
- Write the offer policy down and notify the FCA before you start, as the regulator expects. Decide who approves an offer and how you record what the customer was told.
- Build settlements into the close so each accepted offer flows through to the provision and the ledger without a spreadsheet rebuild every month. A redress programme that lands as a manual reconciliation will slow your month-end close exactly when the numbers are moving most.
Fíjate that a close creaking under this is not a law of nature, it is a design choice, and this is a good moment to fix it (more on that in your month-end crunch is a design choice). Cohort-level provisioning, scenario runs and a clean feed from settlements into the ledger are the difference between a number you can stand behind at every close and one you re-derive by hand each month while the deadline looms.
Frequently asked questions
Can we make car finance settlement offers while the scheme is paused?
Yes. The FCA confirmed on 3 November 2026 that you can, as long as customers are offered no less than they would receive through the scheme. Firms are expected to notify the FCA if they plan to make offers, and to be clear with customers about what accepting means. You do not have to, though: until the legal process concludes you do not need to calculate or pay compensation under the scheme.
When will the car finance legal challenges be decided?
The legal challenges are due to be heard between 16 February and 3 March 2027. A ruling does not land the moment a hearing ends, so plan for the provision to stay an estimate through at least your spring closes, and keep it sensitive to the assumptions that could change once the courts rule.
How big is the motor finance redress scheme?
It covers 12.1 million agreements made between 2007 and 2024. The FCA estimates that 75% of eligible consumers will make a claim, which would mean total redress of £7.5bn, at an average payout of around £830 per agreement. Your own exposure depends on your book, not on that average.
Should we settle now or wait for the scheme?
It is a timing and certainty call, not a question of whether you owe. Settling caps your per-case cost and removes handling costs; waiting keeps the cash for longer and keeps the chance the courts narrow the scope. I would price it per cohort rather than as one firm-wide decision.