Barclays has become the first major British lender to break ranks over car finance compensation, offering early settlements to some motorists while the industry’s £9.1 billion redress scheme remains tied up in legal challenges.
Its finance arm, Barclays Partner Finance, said on Tuesday it would make early settlement offers to customers who had previously complained about commission on their motor finance agreement, where the complaint was acknowledged on or before 1 October 2026. Those customers will have the option of receiving redress sooner, rather than waiting for the wider scheme to run its course.
The move matters because the Financial Conduct Authority’s compensation programme, one of the largest consumer redress exercises the UK financial sector has faced, has been partly suspended since July. Four legal challenges to the regulator’s final rules, brought by the finance arms of Volkswagen and Mercedes-Benz, Crédit Agricole Auto Finance and Consumer Voice, are due to be heard by the Upper Tribunal in February 2027. Until that process concludes, most of the estimated 12 million affected agreements are in limbo, with payments under the main scheme unlikely before late 2027.
Barclays’ early offers are deliberately narrow. Industry reporting suggests they will go to a small pool of borrowers and account for only a small share of the bank’s £430 million total bill for motor finance mis-selling, relating predominantly to so-called Johnson cases — claims involving an undisclosed contractual tie or a discretionary commission arrangement, with commission of at least 50 per cent of the total cost of credit and 22.5 per cent of the loan. That detail has been reported by Sky News and has not been separately confirmed by Barclays, which declined to comment further.
The regulator, meanwhile, has moved to set the terms for any early deals. The FCA warned lenders on Tuesday against low-ball offers, saying any voluntary compensation should reflect at least the maximum redress available under its scheme, and setting out minimum expectations for offer letters. Its general counsel, Stephen Braviner Roman, has said early settlements could mean some people receive money sooner, and that customers want that choice — but only a minority of claimants are likely to be approached early, with most still waiting on the court case.
For the millions of other drivers, the message is patience. Barclays considered joining the legal challenges, as did Lloyds and Santander, but ultimately decided not to proceed. Its decision to pay some customers now, within the scope of its existing provision, may put pressure on rivals to follow — but unless the February hearing goes the regulator’s way, the bulk of the £9.1 billion will remain unpaid well into next year.
Sources: Reuters, “Barclays offers early settlement deals to some UK motorists” (https://www.reuters.com/legal/transactional/barclays-offers-early-settlement-deals-some-uk-motorists-2026-11-03/); Reuters, “UK regulator warns car finance firms against low-ball redress offers” (https://www.reuters.com/business/finance/uk-regulator-warns-car-finance-firms-against-low-ball-redress-offers-2026-11-03/); Sky News, “Barclays to begin car finance payouts months before outcome of legal challenge” (https://www.mansfieldradio.co.uk/newsandsport/news-and-sport/business-news/barclays-to-begin-car-finance-payouts-months-before-outcome-of-legal-challenge/).
