Barclays Partner Finance plans to begin offering compensation this month to tens of thousands of customers who say they were mis-sold car finance. Some people who accept an offer could receive payment before Christmas, making Barclays the first major UK lender to start paying complainants while legal challenges to the wider scheme remain unresolved.
The lender is basing its offers on the Financial Conduct Authority’s compensation model. Under the rules, an early settlement must be at least as much as the customer would receive under the scheme. Barclays said customers would be told how their offer was calculated and what accepting it means.
Customers will have one month to decide. Those who accept will receive payment into their nominated account, but cannot later claim additional compensation or pursue another complaint or legal claim over commission on that agreement. Barclays Partner Finance has said it will not seek repayment if the final outcome means a customer would have been entitled to less.
Those who turn down an offer can wait for the outcome of the legal proceedings, but the amount and timing of any eventual compensation are uncertain. The FCA said payments could start in 2027 if its scheme is upheld; an appeal or a decision to overturn some or all of the scheme could push payments to 2028 or later. Depending on the outcome, people who reject an early settlement could receive more, less or no compensation. The regulator supports early offers provided they are no lower than payments under its scheme.
The FCA announced a £9.1bn compensation scheme in March for people affected by car finance mis-selling. Legal challenges have led to a partial suspension, with a hearing scheduled for February next year. The regulator had expected average payments of £829 this year, although the final amount depends on each case.
The scandal concerns drivers who paid more than they should have for car loans after commission arrangements between lenders and dealers affected borrowing costs. The FCA scheme covers motor finance taken out between 2007 and 2024 for cars, motorbikes and vans. Barclays has set aside £430m in connection with alleged mis-selling; the total number of people affected and how many will receive early offers are not clear.
Sources: The Guardian Business.