Barclays has confirmed it will start making early settlement offers to some customers who were mis-sold car loans, potentially giving them money sooner while the Financial Conduct Authority's (FCA) industry-wide compensation scheme faces delays.
The FCA said it would welcome firms offering payments to consumers owed compensation on some car finance agreements during this period, as parts of its redress scheme are suspended due to legal challenges. The court case is due to go ahead in February, with a judgment and any payments expected months after that.
Early Offers and Consumer Choice
Until the court case concludes, lenders are not expected to pay compensation to people owed money under the scheme. However, the regulator said any early offer would have to match or exceed the amount people would receive under the FCA scheme.
Barclays confirmed it was offering payments to some customers who have previously complained about the commission on their motor finance agreement. Consumers would have a month to accept or reject the offer.
The lender, which exited the motor finance market several years ago, previously set aside around £325 million to cover potential costs related to historical mis-selling. Lloyds Banking Group, which continues to operate in the market through the Black Horse brand, set aside £1.95 billion but has not yet begun offering payments.
Industry Reactions
A Barclays Partner Finance spokesperson said: “We recognise that some customers have already faced a considerable wait for an outcome on their motor finance complaints. By making these early settlement offers, we are giving some customers the option of receiving redress sooner, rather than waiting for the legal challenges and any subsequent FCA action to conclude.”
Stephen Braviner Roman, the FCA’s general counsel, said it was clear that people “want the choice” to get money sooner. “Anyone who wants to wait can, and there’s no obligation to agree to the offer,” he said. “We’ll closely monitor firms making offers and expect them to be clear what accepting an offer means.”
A spokesperson for the Financing and Leasing Association (FLA) cautioned that settlement offers do not necessarily “remove the dilemma facing lenders”. “On the one hand, delaying payments until the legal issues are resolved means customers who have suffered harm may have to wait longer for redress,” they said. “On the other hand, rushing to settlement risks consumers receiving an outcome that may not reflect the final position once the ongoing legal challenges have been determined.” The FLA said it “wants to see consumers receive the fairest outcome in as timely a way as possible”.
