By Ahmed Abdelsalam
Drivers who were mis-sold car loans could receive payouts sooner than expected, as the Financial Conduct Authority (FCA) signals it will not oppose voluntary compensation offers while its industry-wide redress scheme faces legal challenges.
Barclays Offers Early Settlements
Barclays has confirmed it will begin making early settlement offers to some customers who previously complained about commission arrangements on their motor finance agreements. The bank, which exited the motor finance market several years ago, has set aside around £325 million for potential mis-selling costs. Customers will have one month to accept or reject the offers.
FCA Welcomes Voluntary Payments
The FCA's general counsel, Stephen Braviner Roman, said the regulator would welcome firms offering payments that match or exceed the amounts consumers would receive under the official scheme. He emphasized that accepting an offer is optional and that the FCA will monitor firms to ensure clarity about the implications.
Legal Challenges Delay Official Scheme
Parts of the FCA's redress scheme are suspended pending a court case scheduled for February, with a judgment and any resulting payments expected months later. Until the case concludes, lenders are not expected to pay compensation under the scheme.
Lloyds Holds £1.95 Billion in Reserve
Lloyds Banking Group, which continues to operate in the market through its Black Horse brand, has set aside £1.95 billion for potential costs but has not yet begun offering payments.
Industry Highlights Dilemma
The Financing and Leasing Association cautioned that early settlements do not resolve the fundamental dilemma: delaying payments harms consumers who have suffered, while rushing settlements risks outcomes that may not reflect the final legal position. The association said it wants consumers to receive the fairest outcome as quickly as possible.
