Car finance payouts may start early as Barclays opens offers, FCA says

Car finance lenders could start paying out early compensation to UK drivers, even though the whole mis-selling saga is still stuck in court. The Financial Conduct Authority said it would welcome lenders making settlement offers, as long as customers don't end up worse off than they would be under the regulator's proposed central scheme.

Barclays is already moving. The bank has confirmed it will start making early compensation offers from now, and the FCA expects other lenders to follow. Those who take a deal get money sooner; those who don't can sit tight for the official scheme.

That official scheme is facing a legal challenge set to be heard in February, which means payouts from it probably won't land until late next year. The FCA said only a minority of claimants are likely to get early offers, with most left waiting on the court's decision.

Stephen Braviner Roman, the FCA's general counsel and co-lead on the motor finance project, said fair settlement offers could mean some people get paid sooner, adding that anyone who wants to wait can — there's no obligation to accept. He said the FCA will keep a close eye on firms making offers and expects them to spell out exactly what accepting means.

The mess goes back to how car loans were sold. Most new cars and plenty of used ones are bought on finance: a deposit up front, then monthly payments with interest. Millions of drivers who took out loans between April 2007 and November 2024 are in line for compensation, largely because dealers were paid commission by lenders based on the interest rate charged — arrangements known as DCAs that customers often weren't told about.

The numbers are big. Average payouts of around £829 are expected across roughly 12 million car loans, about 37% of all loans made in that period. For now, anyone offered an early deal has a choice to make: cash today, or wait for the courts.