Barclays will this month start offering compensation to tens of thousands of customers who claim they were mis-sold car loans, the Guardian reported on Tuesday. Those who accept are likely to see money arrive before Christmas.
The bank has become the first major UK lender to offer payouts while an industry-wide compensation scheme remains subject to legal challenge. In March, the Financial Conduct Authority announced a £9.1bn scheme for the millions of victims of the scandal, in which drivers were overcharged for loans as a result of commission payments between lenders and car dealers between 2007 and 2024. Legal challenges forced the regulator to partly suspend the scheme, with a hearing scheduled for February next year.
Barclays Partner Finance will contact customers who have already complained and offer an early full and final settlement calculated using the FCA model. The FCA had expected to pay £829 on average this year to those affected. Under the rules, early settlement offers must at least match what people would receive under the suspended scheme. Customers will have a month to accept or reject, and those who accept cannot later seek additional compensation or pursue further complaints or legal claims relating to the commission on that agreement.
Millions of people were treated unfairly when they took out motor finance to buy a new or secondhand car, motorbike or van, and ended up paying more than they should have done. Until the legal challenge is concluded, lenders do not need to pay compensation to people owed money under the scheme. However, Barclays has decided to offer payments now to some of those who would be due compensation.
Barclays said acceptance is optional and customers will receive clear information on how their offer has been calculated and what accepting it would mean. The bank will pay the money into designated accounts for those who say yes. It is thought the first payments for those who accept the offer will arrive before Christmas, which may feed into some people's decision-making.
Why it matters for wealth
The move may prompt other lenders to follow, potentially accelerating payouts across an industry that has set aside billions. Barclays has reserved £430m in connection with alleged motor finance mis-selling. Those who decline the early offers and wait for the legal outcome could receive more, less or no compensation, the FCA said, with payments potentially delayed until 2028 or later if the judgment is appealed or the scheme overturned.
Barclays said it would not ask people who accept now to repay any compensation if the final outcome meant they would have been entitled to less. The FCA said it supported lenders making settlement offers, as long as customers are offered no less than they would receive through the scheme. If the regulator prevails in court and its scheme is upheld, payments could begin in 2027. By far the biggest category of claims is deals that allowed the dealer or broker to increase the interest rate the customer would pay, to get a higher commission.
Source: The Guardian
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