Barclays will offer early compensation to tens of thousands of car finance customers this November, despite an ongoing legal challenge to the UK’s £9.1 billion redress scheme. Some motorists could receive their money before Christmas, months before the courts decide the future of the wider compensation programme.
The decision makes Barclays the first major UK lender to offer settlements while parts of the Financial Conduct Authority’s (FCA) scheme remain suspended. Customers who accept will receive compensation calculated under the regulator’s existing rules, but they will give up the right to seek further payments if those rules subsequently change.
Barclays Sets Out Early Payments for Affected Motorists
Barclays Partner Finance will contact selected customers whose complaints were acknowledged on or before 1 October 2026. The bank expects to issue tens of thousands of offers before the end of November, although not everyone meeting that deadline will receive one.
According to MoneySavingExpert, eligible customers receiving an offer will have one month to accept or reject it. Those who agree will receive payment within a further month, meaning the final payments under this arrangement should arrive by 31 January 2027.
The bank has already set aside £430 million to cover liabilities associated with motor finance mis-selling. Its early settlements will follow the FCA’s compensation methodology, which currently estimates average payments of approximately £830 per affected agreement.
A Barclays Partner Finance spokesperson said customers would receive clear explanations of how their compensation had been calculated and what accepting a full and final settlement would mean.
Accepting an offer closes the complaint permanently. Customers cannot subsequently request additional compensation or ask the Financial Ombudsman Service to reconsider their settlement, even if the legal challenges produce more favourable terms.
They will, though, keep their payment if the eventual outcome reduces the amount they would otherwise have received.
Legal Challenges Leave Millions Waiting for Compensation
The wider compensation scheme concerns car finance agreements entered into between 6 April 2007 and 1 November 2024. Many customers were not adequately informed about commission arrangements between lenders and dealerships, including agreements that encouraged brokers to increase interest rates.
According to the FCA, approximately 12.1 million agreements, representing 37% of those made during the relevant period, could qualify for compensation.
The regulator introduced its £9.1 billion scheme in March 2026, but legal challenges from three motor finance providers and consumer organisation Consumer Voice have delayed its implementation.
The Upper Tribunal will hear those challenges between 16 February and 3 March 2027. If the scheme survives and no appeal follows, payments are expected to begin during 2027. Further proceedings could push compensation into 2028 or later.
According to Reuters, the FCA has warned lenders that voluntary early settlements must not fall below what customers would receive under its proposed scheme.
Consumer advocates remain divided over whether customers should accept early offers. Some favour the certainty of an immediate payment, while others argue that the regulator’s proposed compensation may underestimate individual losses.
Motorists who decline an offer retain the opportunity to pursue compensation through the eventual scheme or other available routes.
For those who have not yet complained, the FCA continues to recommend contacting their lender directly. Complaints can be submitted free of charge, without employing a claims management company or solicitor.
