Barclays begins car loan compensation offers amid legal dispute

Under the terms of these “early settlement” offers, the amounts must at least match what individuals would receive under the broader compensation scheme. Consumers now face a complex decision: accepting the offer and potentially receiving funds before Christmas, or declining and waiting for the legal proceedings to conclude.

The Financial Conduct Authority (FCA) initially announced a £9.1bn compensation scheme in March, anticipating an average payout of £829 per affected individual. The scandal involved overcharging drivers on loans due to commission payments between lenders and car dealers between 2007 and 2024, impacting millions who took out motor finance.

Barclays Partner Finance, a division of the banking group, will contact tens of thousands of customers over the next couple of weeks with settlement offers calculated using the FCA’s model. Acceptance is optional, and customers will receive details on the calculation and implications. Those who accept cannot pursue further claims.

The FCA projects that if its scheme is upheld, payments could begin in 2027; however, appeals or overturning could delay compensation until 2028 or later. Barclays has allocated £430m to address the alleged mis-selling, and the total number of affected individuals and the proportion receiving early settlements remains unclear. The FCA supports lenders offering settlements, provided they are no less than what would be received through the scheme.