Martin Lewis has urged motorists to accept a payout offered to them after Barclays confirmed it would start making early settlement offers regarding mis-sold car finance. More than 12 million car, van, or motorbike purchases made between April 6, 2007 and November 1, 2024 are thought to be eligible for an average of £830 back.
It can only apply to vehicles bought on PCP or Hire Purchase during that time, and is because some car dealers and lenders used 'discretionary commission arrangements' (DCAs) when selling car finance. The Financial Conduct Authority (FCA) has had some of its redress scheme suspended as it faces legal challenges in court, with the case due to go ahead in February and a judgment and any payments expected months after that.
But, in a major new development, 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.
Accepting the offer
Reacting to the news, Mr Lewis said there were pros and cons to accepting the offer but, if you are offered it, he said you should probably take it. He explained: "We've just had the news that Barclays Partner Finance is to pay out early car finance mis-selling claims. It's the first one to do it. Companies are allowed to do it under the regulator, the FCA's, regime."
"Now, this is really interesting because the main mass redress scheme is on hold until at least February, when four firms are challenging it in court. And even if that were to go through and the challenges were all to fail, it would still be the end of 2027 before people get their payouts. So what's happening here is Barclays is going to write to some customers who have already put a complaint in — it won't be identifying people who have a complaint who haven't put one in — and it's going to give them an offer. And that offer has to be based on the FCA's existing mass redress compensation level, so you would get the same amount."
"So lots of people are starting to say to me, 'Should I do it? Shouldn't I do it?' Here are my thoughts. First of all, when these legal challenges first came out, about 60% of you were saying, 'I just want my payout now'. If you're in that position and Barclays gives you an offer, then here are the pros."
"First of all, you'll get your money now at the same level of the current mass redress scheme. Secondly, it will be simple. It will write to you, you'll be able to accept, you can get the money, but it is a full and final settlement. And third, there is always the risk that the mass redress scheme, the challenge to it by the three car finance firms succeeds, the mass redress scheme is stopped, and they won't be doing payouts."
"So if that were to happen, well, the whole thing would be over, and then it would be much more complicated to get a claim in. You'd either have to make an individual claim yourself and then go through to the ombudsman or go through to court."
Rejecting the offer
Mr Lewis continued: "What's the negative of accepting it? Simple: one of the four cases is asking that the compensation be increased. And if the compensation were to be increased and you'd taken Barclays' money, well, yours is a full and final settlement, you would not get the increase."
"But I think for most people who just want the money in their pocket now, if you're offered it, go for it. I mean, there is also the option of going to court, which could get you a bigger payout, though of course most people would need to use a claims firm to do that. So, in a way we're finally seeing some payouts."
"We don't yet know how many people — probably tens of thousands is a guess — Barclays will be offering at this point, but it is worth a look. There's a lot more detail: please read the news story on my site, which goes through it in MoneySavingExpert, which goes through it in much more detail. But just a quick heads-up."
Why is Barclays offering payouts?
Barclays, which exited the motor finance market several years ago, previously set aside around £325 million to cover the 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.
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."
Settlement 'risks'
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".
