The City watchdog today warned motor finance lenders ‌not to offer mis-selling compensation lower than the sums available under its own - partially suspended - scheme. Voluntary offers must at least match the maximum available under the £9 billion redress plan, the Financial Conduct Authority said.

The warning comes after Barclays yesterday confirmed it will make early compensation offers in advance of legal challenges to the FCA scheme that will be heard in February. Other lenders are expected to follow suit, creating another complication for law firms and CMCs hoping to profit from running claims outside the scheme.

Research by Kantar released by the FCA today shows that nearly nine out of 10 car finance customers who have complained or are considering doing so want the choice of an offer of compensation now, rather than waiting for the legal challenges from lenders and claimant lawyers to conclude. Six out of 10 said they would accept an offer in line with the scheme.

The FCA reiterated that borrowers do not need to use a law firm or claims management company to obtain compensation, warning that such firms may charge up to 36% of any settlement.

The survey findings were published alongside the FCA’s expectations for lenders who want to make settlement offers while the legal challenges continue. 'Lenders will need to be clear with people about what accepting any offer means,' the watchdog said. ‘This includes that they will keep any money received, even if the outcome of the legal challenges means they would have received less. However, they also wouldn’t be able to claim more later if the outcome of the legal challenge means they would have been paid more. As consumers can reject an offer and leave their claim to be dealt with under the scheme, these offers can’t be referred to the Financial Ombudsman Service for review.’

Stephen Braviner Roman, FCA general counsel and co-lead on the motor finance project, said: ‘Fair settlement offers could result in some people getting money sooner. And it’s clear they want the choice. Anyone who wants to wait can, and there’s no obligation to agree to the offer. We’ll closely monitor firms making offers and expect them to be clear what accepting an offer means.’