Barclays becomes first major lender to offer early motor finance payouts

Barclays has become the first major UK lender to announce plans to offer early compensation to motorists affected by the car finance mis-selling scandal, ahead of the outcome of legal challenges to the Financial Conduct Authority’s (FCA) £9.1bn redress scheme.

Barclays Partner Finance confirmed on 3 November that it would make early settlement offers to selected customers who had previously complained about commission arrangements on their motor finance agreements.

In a statement reported by Reuters, the bank said it would offer early settlements to customers whose complaints about motor finance commissions had been acknowledged on or before 1 October 2026, giving them the opportunity to receive compensation sooner.

The move follows growing discussion within the motor finance industry about whether lenders should begin settling claims rather than waiting for the conclusion of legal proceedings.

Barclays, which has set aside £430m to cover potential motor finance compensation liabilities, is expected to contact eligible customers over the coming weeks.

The bank said offers would be calculated using the FCA’s redress methodology, with customers receiving details of how their compensation had been determined and the implications of accepting a full and final settlement.

Tens of thousands of motorists could receive early offers, although the arrangements will initially apply to a relatively small proportion of those potentially eligible for compensation.

FCA warns lenders over early settlement offers

The announcement comes as the FCA has set out expectations for lenders considering compensation payments outside its industry-wide redress scheme.

The regulator has welcomed initiatives that could allow consumers to receive fair compensation sooner but warned lenders against offering settlements below the amounts customers would receive under its proposed scheme.

The £9.1bn redress programme has been partially suspended following legal challenges brought by several parties, including Crédit Agricole, Volkswagen Financial Services, Mercedes-Benz Financial Services and consumer group Consumer Voice.

The challenges have created uncertainty over the timing and final structure of compensation arrangements, with legal proceedings expected in February 2027.

Barclays’ decision could encourage other lenders to explore similar early settlement arrangements while the industry awaits greater clarity on the FCA’s redress framework.

However, customers accepting full and final settlements will need to consider the implications of doing so before the outcome of the legal challenges is known.