Barclays has confirmed it will begin making early compensation offers to car finance customers, ahead of the legal challenge to the Financial Conduct Authority's (FCA) proposed central redress scheme. The BBC reports that other lenders are expected to follow.
The FCA said it would welcome settlement offers as long as customers do not receive a worse deal than under its central scheme. The scheme faces a legal challenge, with a hearing scheduled from 16 February to 3 March, and compensation is unlikely to be paid until late next year.
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. It's clear they want the choice."
The FCA expects only a minority of claimants to receive early offers. Most will have to wait for the outcome of the court case.
Barclays said each offer will be calculated using the FCA's redress methodology. A Barclays Partner Finance spokesperson said: "By making these early settlement offers, we are giving some customers the option of receiving redress sooner, rather than waiting for the legal challenges and any subsequent FCA action to conclude." Barclays said customers would start to be contacted directly "in the coming weeks," but not all eligible customers will receive an offer.
The FCA says lenders must be clear that accepting an offer means customers can keep the payment even if the final scheme payout is smaller, cannot claim more later, and leave the scheme with no further input from the Financial Ombudsman Service.
The BBC reports that the scheme covers millions of drivers who took out car loans between April 2007 and November 2024, mainly over discretionary commission arrangements. The FCA estimates average payouts of about £829 across about 12 million loans, with total industry costs of up to £9.1bn including administrative costs.
Consumer Voice said the proposed scheme leaves "too many people short-changed." Volkswagen Financial Services, Mercedes-Benz Financial Services and Credit Agricole Auto Finance are also challenging the scheme.