By Karim Hammam
Barclays has become the first major UK lender to offer compensation to tens of thousands of customers who say they were mis-sold car loans, with some payments expected to arrive before Christmas. The bank’s partner finance division will contact eligible complainants over the coming weeks with “early full and final settlement” offers calculated using the Financial Conduct Authority’s model.
First Major Lender to Break Cover
The move comes amid a legal battle over an industry-wide compensation scheme announced by the FCA in March. That scheme, valued at £9.1 billion, was partly suspended after legal challenges, and a hearing to decide its future is scheduled for February next year. Until the challenge is resolved, lenders are not required to pay out under the scheme, but Barclays has chosen to act now.
Compensation Scheme Background
The scandal involves commission arrangements between lenders and car dealers from 2007 to 2024 that led to drivers being overcharged on finance agreements for cars, motorbikes and vans. The FCA had estimated average payouts of £829 per affected customer. Barclays has set aside £430 million for potential mis-selling claims, though the total number of affected customers remains unclear.
Customer Decision Deadline
Customers who receive an offer will have one month to accept or reject it. Acceptance is optional, and the bank says it will provide clear information on how each offer was calculated. Those who accept will receive payment into their designated account, but they cannot later seek additional compensation or pursue further claims related to the commission on that agreement.
Potential Outcomes
If the FCA’s scheme is upheld, payments could begin in 2027; if it is overturned or appealed, compensation could be delayed until 2028 or later. The regulator has said customers who decline the early offers could ultimately receive more, less, or no compensation depending on the legal outcome. Barclays has stated it will not ask customers to repay any money if the final settlement turns out to be lower than the early offer.
