Barclays Partner Finance has announced plans to begin offering compensation this month to tens of thousands of customers who claim they were mis-sold car loans. The move makes Barclays the first major UK lender to proactively distribute payouts amid ongoing legal disputes surrounding an industry-wide compensation scheme.
The Financial Conduct Authority established a £9.1 billion compensation scheme in March following revelations that millions of people were overcharged for motor finance between 2007 and 2024. The scandal involved commission payments between lenders and car dealers that resulted in drivers paying more than necessary when purchasing vehicles. However, legal challenges have forced the FCA to partially suspend the scheme, with a key hearing scheduled for February next year to determine the scheme’s future.
Barclays is using the FCA’s calculation model to determine compensation amounts for eligible customers. Those receiving offers will have one month to accept or decline, and the bank has indicated that accepted payments could arrive before the end of the year. Customers who accept the offer will be unable to pursue additional claims or legal action related to the same agreements. The bank has set aside £430 million to address alleged mis-selling claims.
Regulations require that early settlement offers must match or exceed what customers would receive under the suspended FCA scheme. However, customers face uncertainty about their decision, as declining early offers could result in receiving more, less, or no compensation depending on the outcome of the legal challenge. The FCA indicated that if the scheme is upheld, payments could begin in 2027, but further appeals or overturns could delay compensation until 2028 or beyond.
Barclays has pledged not to require repayment of compensation if the final judgment determines recipients would have been entitled to less money. The development has prompted speculation that other lenders facing similar liability may follow with their own settlement offers in the coming weeks.
Article Attribution | Read More at Article Source
Article summary produced by Claude AI