Barclays begins early car finance settlements, with one month to decide

Barclays Partner Finance will make early settlement offers to some customers who complained about commission on a car finance agreement, the bank confirmed on 3 November. It is the first major UK lender to pay redress while the industry-wide scheme remains tied up in court, and it moved on the same morning that the Financial Conduct Authority published the conditions such offers have to meet.

The offer is narrower than it sounds. It covers customers whose complaints were acknowledged on or before 1 October 2026, and Barclays says not everyone in that group will receive one. Recipients will be contacted directly in the coming weeks. There is no queue to join and no need to call the bank to ask whether an offer is coming.

Barclays Partner Finance left the motor loan sector in 2019, so this is a closed book being worked through rather than a live lending decision. Sky News reported on 2 November that the first batch would go to a limited pool of borrowers and account for a small share of the bank's £430m provision for motor finance mis-selling. That provision is equivalent to just under 5% of the £9.1bn bill the FCA expects the industry to carry.

The floor under an early offer

An early settlement is not a negotiation. The FCA's expectations for lenders, published on 3 November, say an offer must be at least as much as the customer would receive through the redress scheme. Lenders have to explain how the figure was calculated, and offer letters must give customers at least one month to respond.

Accepting has consequences that run in both directions. A customer who accepts keeps the money even if the legal challenges produce a lower figure than the scheme would have paid. They also give up the chance to claim more if the courts produce a higher one. The settlement is full and final for commission complaints on that agreement, and an offer cannot be referred to the Financial Ombudsman Service for review.

The regulator has told lenders not to imply that it has approved an individual offer. It publishes a factsheet that lenders must give to customers, and it will list the lenders making offers on its website so that a letter can be checked against a genuine scheme.

"Fair settlement offers could result in some people getting money sooner. And it's clear they want the choice," said Stephen Braviner Roman, the FCA's general counsel and co-lead on the motor finance project. "Anyone who wants to wait can, and there's no obligation to agree to the offer."

What the scheme would pay

The scheme covers motor finance agreements taken out between 6 April 2007 and 1 November 2024 where commission was paid by the lender to the broker. The FCA's final policy statement, published on 29 March 2026, puts the eligible population at 12.1 million agreements and the average redress at £829 per agreement.

Its cost estimates are often quoted as a single compensation figure, which they are not. The FCA expects £7.5bn in redress at 75% uptake, plus £1.6bn in administration, for a total bill to firms of £9.1bn. Dividing £7.5bn across the roughly 9.1 million agreements that uptake implies gives about £826 each, close to the published £829 average. Spread across all 12.1 million eligible agreements, the £9.1bn total is about £752 each, a lower number because it includes administration costs and assumes a quarter of eligible customers do not take part.

The scheme is partly suspended while four legal challenges are heard. The Upper Tribunal will consider them between 16 February and 3 March 2027. Firms do not have to calculate or pay compensation under the scheme until that process concludes, though they must keep preparing and progress complaints as far as they can. If the scheme is upheld and not appealed, the FCA expects payments during 2027.

Why the banks are moving now

The regulator's case for early offers rests on its own research. Kantar surveyed 1,000 motor finance customers online between 25 and 28 June 2026, and the findings below come from the 590 respondents who had complained or were considering it. Among that group, 89% wanted the choice of an offer now rather than waiting for the legal challenges, 86% said they would be comfortable making the decision, and 61% said they would accept an offer in line with the scheme. For 77%, receiving compensation sooner would make a great deal or a fair amount of difference to their finances.

That is a strong signal for lenders holding provisions against a scheme that may not pay out for another year. "Lenders have been considering making early settlement offers but have been reluctant to move ahead without a clear signal from the regulator," said Harry Charalambous, principal at consultancy Broadstone. "With that reassurance now in place, we could see a number of lenders break cover and begin offering compensation ahead of the wider scheme."

Barclays is first but not necessarily representative. The FCA says not all lenders are likely to make offers, and those that do may only make them to some customers owed compensation. Two customers with similar agreements at different lenders could have very different experiences over the next year, which is why the regulator will publish the list of participating firms.

If an offer arrives

The letter should state that the offer is at least the maximum redress available under the scheme and show how that was established. It should give at least a month to respond, include the FCA factsheet, and explain what accepting means for future complaints. A customer can seek independent advice before deciding, and Barclays says it will not ask for money back if the final outcome would have entitled the customer to less.

Anyone who rejects an offer, or does nothing, stays in the scheme and will hear more after the legal process concludes. Depending on the outcome, that could mean a larger offer, a smaller one, or no offer at all.

Claims management companies can charge up to 36% of any compensation, including VAT, the FCA says. Complaining directly to a lender is free, and there is no need to use a representative. Anyone who has not complained yet can still do so, and the FCA's consumer pages set out the process.

What it changes

For most people with a car finance complaint, nothing has changed today. The scheme still exists, the suspension still holds, and the tribunal still sits in February. What has changed is that the first route around the wait is open, for a small group of customers at one lender. The rest of the market will watch whether early offers settle quietly or produce complaints from people who accepted before the courts had their say.

The timetable for the legal challenge is set out in our earlier piece on the tribunal date, and the gap in dispute resolution outside finance complaints is covered in our look at the Motor Ombudsman's tenth year.