Barclays begins early payouts to car finance mis-selling victims

Drivers may soon receive compensation offers from lenders as part of the car finance mis-selling saga. The Financial Conduct Authority (FCA) announced that it would support settlement offers, provided they are not less favorable than its proposed central compensation scheme. This scheme is currently facing a legal challenge set to be heard in February, meaning that widespread compensation payments may not begin until late next year.

The context for these early offers is rooted in the widespread mis-selling of car loans between April 2007 and November 2024. Many customers were not informed about commission arrangements that car dealers received from lenders, which were based on the interest rates charged to borrowers. As a result, millions of drivers are entitled to compensation. The FCA estimates that about 12 million car loans could lead to average payouts of around £829, contributing to an industry-wide compensation cost of up to £9.1 billion.

Barclays has taken the initiative to begin making early compensation offers, allowing some claimants to receive redress sooner than they would under the FCA's proposed scheme. A spokesperson for Barclays stated that this approach aims to alleviate the long wait claimants have already endured. They emphasized that each offer will be based on the FCA's redress methodology, making it clear how offers are calculated and what accepting them would entail.

While Barclays is leading the charge, the FCA expects that only a minority of claimants will receive early offers. Most customers will still have to await the outcome of next year’s court case. The FCA is closely monitoring these developments to ensure that all firms making offers do so transparently, allowing customers to make informed decisions about whether to accept early compensation.