Barclays to offer early compensation to some car-finance customers

Barclays is preparing to offer some car-finance customers compensation before a court challenge to the Financial Conduct Authority’s proposed redress scheme is heard in February. The FCA says lenders can make early offers, provided customers are not given less than they would receive under the scheme, but says most claimants will still have to wait.

The dispute concerns loans taken out between April 2007 and November 2024. The FCA expects about 12 million loans—around 37% of those made during that period—to qualify for compensation, with an average payout of about £829. The total cost to the industry could reach £9.1bn, including administration.

Barclays says it will contact some customers in the coming weeks. It says offers will use the FCA’s proposed method for calculating redress and will explain the consequences of accepting. The lender has cautioned that not everyone whose complaint was acknowledged by 1 October 2026 will receive an early offer.

Accepting a full and final settlement means customers cannot later claim more if the court challenge results in a higher payment under the scheme. They would also leave the scheme and lose further input from the Financial Ombudsman. Customers can keep an early payment even if the final scheme would have paid less. The FCA has published guidance on early offers and plans to list participating lenders to help customers avoid scams.

The FCA’s scheme remains partly suspended while legal challenges proceed. Three lenders—Volkswagen Financial Services, Mercedes-Benz Financial Services and Crédit Agricole Auto Finance—are challenging it. The Upper Tribunal is due to hear the cases from 16 February to 3 March. The FCA says it expects only a minority of claimants to receive early offers; compensation under the wider scheme is unlikely to be paid until late next year.

The loans at the centre of the dispute often involved dealers receiving commission from lenders based on the interest rate charged to customers. These discretionary commission arrangements were often not disclosed. Consumer group Consumer Voice has argued that the proposed scheme would leave too many people short-changed.

Drivers who have not yet complained can still contact their lender directly.