Drivers mis-sold car finance agreements may receive compensation offers from lenders before a legal challenge to the Financial Conduct Authority's central compensation scheme concludes in late 2025.
The FCA said it would welcome early settlement offers as long as customers received no worse terms than the proposed central scheme provides. Barclays has confirmed it will make early compensation offers starting in the coming weeks, with other lenders expected to follow.
The FCA expects only a minority of claimants to receive early offers, with most waiting for the court case outcome. Stephen Braviner Roman, the FCA's general counsel, said customers who accept early offers have "no obligation" to do so and can choose to wait.
Millions of drivers who took out car loans between April 2007 and November 2024 are entitled to compensation after lenders failed to disclose commission arrangements with dealers. About 12 million loans qualify, representing roughly 37 percent of all loans issued during that period.
Average compensation payouts of about £829 are expected. The industry faces costs of up to £9.1 billion including administrative expenses. Individual payouts will vary based on the degree of harm each driver experienced.
The FCA published a factsheet to help drivers decide whether to accept early settlements. It will include a list of lenders making early offers to prevent scams. Lenders must clearly explain that accepting an early offer means customers cannot claim more later if the legal challenge results in higher compensation, and they exit the FCA scheme entirely.
Three lenders challenge the FCA scheme: Volkswagen Financial Services, Mercedes Benz Financial Services, and Credit Agricole Auto Finance. The Upper Tribunal will hear the legal challenge from 16 February to 3 March 2025.