FCA backs early car finance payouts as Barclays moves first
BBC News reports the FCA will allow lenders to make early car finance compensation offers if no worse than its scheme, as Barclays begins offers while a legal challenge looms.
What you need to know
BBC News reports the UK Financial Conduct Authority will allow lenders to make early compensation offers to car finance mis-selling claimants, provided deals are no worse than its proposed central scheme. Barclays confirmed it will begin making early offers from now, though the FCA expects only a minority of claimants to receive them.
- The FCA said it would welcome lenders making settlement offers as long as customers were not given a worse deal than under its proposed central scheme.
- Barclays has confirmed it will make early compensation offers from now, with others expected to follow, and will contact claimants directly in the coming weeks.
- The FCA said it would still only expect a minority of claimants to be made early offers, with most having to wait for the outcome of next year's court case.
- Average compensation payouts of about £829 are expected to be made related to about 12 million car loans, with industry costs up to £9.1bn.
- The UK's Upper Tribunal has agreed to hear legal challenges to the scheme, with a hearing scheduled from 16 February to 3 March.
FCA sets conditions for early offers
The Financial Conduct Authority said it would welcome lenders making settlement offers as long as customers were not given a worse deal than under its proposed central scheme, according to BBC News. The regulator said it would still only expect a minority of claimants to be made early offers, with most having to wait for the outcome of next year's court case.
Stephen Braviner Roman, the FCA's general counsel and co-lead on the motor finance project, said fair settlement offers could result in some people getting money sooner. The regulator said lenders will need to be clear with people about what accepting any offer means, including that accepting an offer takes them out of the scheme and stops further input from the financial ombudsman.
Barclays begins contacting claimants
Barclays has confirmed it will make early compensation offers from now, with others expected to follow suit, BBC News reports. A Barclays Partner Finance spokesperson said each offer will be calculated using the FCA's redress scheme methodology and that claimants would start to be contacted directly in the coming weeks. The lender stressed not all customers whose complaints were acknowledged on or before 1 October 2026 would receive an early settlement offer.
The main proposed FCA scheme remains partially suspended, pending legal challenges in February. Three lenders - Volkswagen Financial Services, Mercedes Benz Financial Services, and Credit Agricole Auto Finance - are also challenging the scheme. The UK's Upper Tribunal has agreed to hear legal challenges, with a hearing scheduled from 16 February to 3 March.
Scale of expected compensation
Millions of drivers who took out a car loan between April 2007 and November 2024 will be entitled to compensation after the loans were mis-sold, mostly relating to discretionary commission arrangements customers were often not told about. Average compensation payouts of about £829 are expected to be made related to about 12 million car loans - about 37% of the total number during the period. Compensation will cost the industry up to £9.1bn, including administrative costs.
Will all car finance claimants receive early compensation offers?
No. The FCA said it would still only expect a minority of claimants to be made early offers, with most having to wait for the outcome of next year's court case, BBC News reports.
Sources & context
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