UK FCA sets expectations for firms making motor finance settlement offers

The UK Financial Conduct Authority (FCA) has published its minimum expectations for firms making full and final settlement offers while the motor finance redress scheme is partially suspended following a legal challenge. The expectations are intended to help firms ensure that consumers are provided with clear, fair and not misleading information when deciding whether to accept an offer and to promote a consistent approach across firms.

The FCA states that, where a consumer voluntarily enters into a settlement agreement after receiving appropriate information, it would ordinarily expect the related complaint to be treated as withdrawn. This is on the basis that the lender can demonstrate that the offer reflects no less than the maximum redress available under the scheme (i.e. the amount calculated for the individual consumer under the scheme methodology, including relevant adjustments and caps). The FCA expects offer letters to make clear that the FCA has not reviewed the terms of any individual settlement offer and not to suggest or imply that it has approved the specific offer. Firms should also give consumers at least one month to respond.

The FCA sets out further expectations for the content of offers, including: the context in which the offer is being made; an explanation that the amount offered is at least equal to the maximum redress available under the scheme; the consumer's choice between accepting the offer or waiting for the outcome of the legal challenge; what accepting a "full and final settlement" means in practice; and the treatment of mixed complaints. Firms should also signpost consumers to the FCA's published FAQs. The FCA also sets out minimum expectations for the letter appendix setting out the remedy and amount of redress due, including the basis of liability, the amount payable and how it has been calculated, and how the firm has ensured that the offer is no less than the maximum redress available under the scheme.

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