Barclays becomes the first big UK lender to begin offering compensation to tens of thousands of customers who claim they were mis-sold car loans, with early settlement offers that must at least match what the challenged industry-wide scheme would pay. The FCA announced a 9.1bn pound scheme in March, partly suspended amid legal challenges, with a hearing due in February next year.
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Illustrative image · Source: Guardian Business · Car finance: Barclays becomes first big lender to offer payouts for mis-selling of loans · Rights unverified · Reencoded as WebP with metadata removed. Display may be resized or cropped.
Barclays will start offering compensation this month to tens of thousands of people who claim they were mis-sold car loans, becoming the first big UK lender to break cover and begin offering payouts to some customers who have complained, amid an ongoing legal battle over an industry-wide compensation scheme for victims of the UK's car finance scandal. Under the rules, early settlement offers of this kind must at least match what people would receive under the multibillion-pound scheme that is being challenged.
In March this year, the Financial Conduct Authority (FCA) announced a 9.1bn pound compensation scheme for the millions of victims of the scandal. Legal challenges forced the regulator to partly suspend the scheme, and a hearing to decide what happens is due to go ahead in February next year. The FCA had expected to start paying out 829 pounds on average this year to those affected, in which drivers were overcharged for loans as a result of commission payments between lenders and car dealers between 2007 and 2024.
Barclays Partner Finance, part of the banking group, has decided to offer payments now to some of those who would be due compensation under the scheme, prompting speculation that other companies on the hook for payouts will follow suit. It is understood that over the next couple of weeks, tens of thousands of Barclays customers who have already complained will be contacted directly and offered an early full and final settlement. Barclays is using the FCA model to calculate the compensation offers, and said acceptance is optional and customers will receive clear information on how their offer has been calculated and what accepting it would mean.
Customers will have a month to accept or reject the offer, and if they say yes, the bank will pay the money into their designated account. It is thought the first payments for those who accept the offer will arrive before Christmas. But those who accept cannot then later seek additional compensation or pursue further complaints or legal claims relating to the commission on that agreement.
The FCA said that if it saw off the legal challenge and its scheme was upheld, payments could begin in 2027, but if the judgment was appealed or the scheme was partially or wholly overturned, any compensation owed could be delayed until 2028 or later. Ultimately, depending on the outcome, those who decline the early offers could end up being entitled to more, less, or no compensation, the regulator said. Barclays has set aside 430m pounds in connection with alleged motor finance mis-selling, and it is not clear how many people could be affected in total, or what proportion will receive early settlement offers.
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