Drivers may be offered car finance compensation from lenders ahead of the next legal battle in the ongoing mis-selling saga, according to recent updates from the Financial Conduct Authority (FCA). The regulatory body stated that it would welcome lenders making early settlement offers, provided that customers are not given a worse deal than what would be provided under its proposed central scheme.
That central scheme is currently facing a legal challenge scheduled to be heard in February, meaning resulting compensation payouts are unlikely to be distributed more broadly until late next year. However, Barclays has confirmed it will begin making early compensation offers immediately, and other lenders are expected to follow suit.
Understanding Early Car Finance Compensation
The FCA noted that it still only expects a minority of claimants to receive early offers, with the majority having to wait for the final outcome of next year’s court proceedings. Stephen Braviner Roman, the FCA’s general counsel and co-lead on the motor finance project, stated that fair settlement offers could result in some people getting money sooner because it is clear that customers want the choice.
“Anyone who wants to wait can, and there’s no obligation to agree to the offer,” Roman explained. “We’ll closely monitor firms making offers and expect them to be clear what accepting an offer means.”
Background on the Mis-Selling Saga
The vast majority of new cars, and many second-hand vehicles, are bought using finance agreements where customers pay an initial deposit followed by monthly fees with interest. However, millions of drivers who took out a car loan between April 2007 and November 2024 will be entitled to compensation after loans were found to be mis-sold.
These issues predominantly relate to discretionary commission arrangements (DCAs), where car dealers received commissions from lenders based on the interest rates charged to customers without proper disclosure. Average compensation payouts of approximately £829 are expected across roughly 12 million car loans, accounting for about 37% of the total number during the eligible period. Total industry costs could reach up to £9.1bn.
Lender Actions and Consumer Choices
Barclays has decided to initiate early payments to help clear costs off its balance sheet, noting that claimants have already endured a considerable wait. A spokesperson for Barclays Partner Finance stated that early settlement offers give customers the option of receiving redress sooner rather than waiting for legal challenges to conclude. Each offer will be calculated using the FCA’s redress scheme methodology.
The FCA has published a helpful factsheet to guide drivers on whether to accept early settlements. Key conditions of accepting an early offer include:
- Claimants keep their payment even if the final central scheme settlement proves smaller.
- Claimants cannot claim more later if the legal challenge outcome would have yielded a higher payout.
- Accepting an offer removes the claimant from the central scheme and halts further input from the Financial Ombudsman Service.
As reported by the BBC, the main proposed FCA scheme remains partially suspended pending legal challenges at the Upper Tribunal scheduled from 16 February to 3 March. Concerned drivers who have not yet complained can still submit complaints directly to their lenders for free.
Source: Drivers may get compensation offers before car finance saga ends (source-feed timestamp 2026-11-03T10:56:12+00:00). AI-assisted report based on the cited linked article and its RSS feed; details were not independently verified.
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