Barclays to offer EARLY car finance mis-selling payouts while regulator's mass redress scheme on hold till at least February
Barclays Partner Finance, a motor finance arm of the huge banking group, has confirmed it will make early settlement offers to some customers affected by the motor finance mis-selling scandal. A legal challenge to regulator the Financial Conduct Authority's mass redress scheme won't be heard until February 2027 – likely delaying payouts until the end of 2027 at the earliest, if it goes ahead.
Martin Lewis: 'Sixty-four percent said they'd accept an early offer'
Martin Lewis, founder of MoneySavingExpert.com – which has seen millions of people use its Car Finance Free Reclaim tool – gave his instant reaction, which you can watch here:
Read the transcript
Martin Lewis: "So 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 levels. So you would get the same amount. So lots of people 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 wouldn't be over. But then it'd be much more complicated to get a claim in. You would either have to make an individual claim yourself and then go through to the Ombudsman, or go through to court.
"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 had 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."
Or read his analysis:
When the legal challenge was announced, the majority of people were disappointed, and some downright angry at the delay – even at the small firm that promotes group legal claims challenging to increase payments. Sixty-four percent of car finance customers I polled said they'd accept an early offer in line with the regulator's proposed scheme.
For those people, if you're one of those who has complained and are offered the money from Barclays take it. The Financial Conduct Authority has offered firms a voluntary option to make early payouts under the scheme, as long as they are the using the same mass redress scheme calculations, which Barclays is. Plus, the money will be with you by January, before the legal challenge is even heard.
Taking the money has a couple of other advantages too (there are cons coming as well). The first is simplicity, which is what the mass redress scheme was set up to do.
The second is surety that you will be paid. If the three car finance firms bringing a legal challenge to the scheme win, there is a chance it won't go ahead. If so, reclaiming will still be possible, but it will likely be more complex and could involve court or the Ombudsman.
Yet of course there is uncertainty here – no one knows what the court will rule. There is a chance the firm trying to increase payouts will win. If it does and you’ve accepted an early payout, you won't get the uplift, which may be 20% or 30%. Barclays is offering the payout in return for a final settlement. So you have to factor that into your decision.
Of course if you are in the group who are happy to wait, or decided to go to court where payouts could be higher, the calculation shifts.
How early settlement offers will work
Not everyone eligible under the regulator's mass redress scheme will be made an offer by Barclays Partner Finance (a trading name for Clydesdale Financial Services). Only those whose complaint was acknowledged by Barclays Partner Finance on or before 1 October 2026 will be considered.
And even then, Barclays Partner Finance says that only some people will receive an offer, even if they are eligible under the regulator's scheme and their complaint was acknowledged on or before 1 October 2026. It wouldn't give us any further information on which groups of people will or will not get an offer, though we believe the number of offers being sent out will be in the tens of thousands.
Barclays Partner Finance, which announced its early settlement scheme today (Tuesday 3 November), plans to make all early settlement offers before the end of November 2026. If you do not get an offer, it does not mean that you are not due compensation in the future.
Offers will be calculated in the same way as under the regulator's redress scheme
All offers will be calculated using the compensation methodology set out by the Financial Conduct Authority (FCA). This means all offers will be the same as the amount you would get under the regulator's mass redress scheme.
Currently, it's estimated consumers will get back an average £830 per unfair car finance agreement, though the exact amount will vary based on your individual circumstances.
However, as Martin's outlined – one of the four challenges to the FCA's scheme is from a company that is challenging that payouts are too small. So if it were to win, there is a small chance that taking this money now will see you missing out on bigger payouts by waiting.
You will have one month to decide whether to accept the payout
If you are sent an offer by Barclays Partner Finance, you will get one month to accept or reject the offer.
If you choose to accept the offer, Barclays Partner Finance will pay out your redress within one month. This means that the latest you should receive compensation by is 31 January 2027.
Choose to accept the offer? You CAN'T reopen your complaint in future
If you choose to accept your offer from Barclays Partner Finance, your complaint will be closed and you will not be able to reopen it in the future. This means if the terms of the FCA's redress scheme:
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Change in favour of car finance providers, you will not have to pay back any money to Barclays Partner Finance.
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Change in favour of consumers, you will not be able to claim back any extra redress you might have been eligible for.
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Remain the same, you will have received the same level of payout as others and you will not be able to claim again.
You don't have to accept now
If you choose not to accept the offer, you will still have the option to make a claim:
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If the FCA's redress scheme goes ahead, you will be able to make a claim through the official scheme.
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If the FCA's redress scheme no longer goes ahead, you will be able to make a claim directly to the company (and escalate to the Ombudsman or court if necessary).
There is no guarantee that either of these avenues will provide a better or worse outcome.
You should also bear in mind that if you end up taking Barclays Partner Finance to court yourself and win, it is perfectly possible that:
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It could be quicker than going through the redress scheme. We hear some courts are currently placing some cases on hold pending the redress scheme review, but others are proceeding with claims and often finding in favour of the consumer, but it can take a year for anything to go through courts at the moment.
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The headline payout could be bigger. We suspect the amounts the FCA agreed for payouts under the mass redress scheme was a compromise to try and get the scheme out the door without legal challenge – so they're smaller than a typical court payout.
Yet most people would need a claims firm or lawyer for court action, which costs typically 30% + VAT of the payout. The regulator said to us: "Our scheme is likely to be simpler and more certain than taking a claim to court – where after legal fees are deducted, you could end up with less."
The challenge to the regulator's redress scheme will be heard in 2027
Redress payments under the regulator's mass redress scheme were originally due to begin this July, but it was put on pause due to multiple challenges to the FCA's official redress scheme. Three of the challenges to the scheme are from car finance lenders: CA Auto Finance, Mercedes-Benz Financial Services, and Volkswagen Financial Services. The fourth is from organisation Consumer Voice, which is aiming to increase payouts for drivers.
At the time, the FCA said payouts wouldn't take place until at least November 2026. It was then confirmed in July that the legal challenges wouldn't be heard until December 2026 or February 2027, meaning payouts wouldn't begin until at least 2027.
The legal challenge hearing is now going to be heard between 16 February and 3 March 2027, meaning payouts are unlikely to begin until late 2027 at the earliest.
While Barclays Partner Finance is not part of this legal challenge, all complaints related to mis-sold car finance that fall into the remit of the regulator's scheme are currently on pause awaiting the result of the court hearing. However, the FCA has said that car finance firms can resolve complaints early if they match the level of compensation that would be offered under the mass redress scheme.
Not complained? It's still worth submitting a complaint ASAP
If you had a motor finance agreement with Barclays Partner Finance and have not yet complained, you will not be included in the group offered early settlement payouts. However, putting in a complaint now (to Barclays Partner Finance or to other car finance lenders) means if you were mis-sold, you could be due a pay out still if the FCA's scheme gets the go-ahead.
Even if the redress scheme does not go ahead, or is delayed again, other car finance providers may join Barclays Partner Finance and make early settlement offers to those who have already complained.
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