Barclays triggers early payouts to car finance scandal victims, but not all of them

Barclays has announced it will make early settlement offers to some of those affected by the ongoing car finance scandal. This comes as the official redress scheme is currently partially suspended while waiting for the outcome of legal challenges from both lenders and consumer action groups; most consumers are being forced to wait until at least the second half of next year for their share of £9 billion worth of payouts.

Reports suggest that early payouts will only account for a small fraction of the £430 million Barclays Partner Finance has set aside for redress. Exactly which customers will receive an offer has not yet been confirmed, but sources tied to Sky News suggest that they will likely be what’s known as ‘Johnson’ cases.

Such a name derives from Marcus Johnson whose Supreme Court case ultimately helped define the framework for who is and who isn’t eligible for car finance compensation. Johnson’s case involved not only a discretionary commission arrangement – the basis which involves undisclosed commission and on which most car finance claims are made – but also dealer commission that constituted at least 50 per cent of the total cost of credit and 22.5 per cent of the loan itself.

With customers who have had a similar experience under Barclays Partner Finance likely to be the ones offered the opportunity for earlier payouts, a spokesperson for the lender 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.”

In the meantime, industry regulator, the Financial Conduct Authority, welcomed Barclays’ decision on the proviso that it “provide[s] consumers with no less than they would receive under the FCA's redress scheme”. Barclays stated: “Each offer will be calculated using the FCA’s redress scheme methodology.”

The FCA also acknowledged the “dilemma” that lenders face. With the likes of Volkswagen Financial Services and Mercedes-Benz Financial Services – two of the firms making a legal challenge against the FCA’s plans – having set aside £725 million and £424 million respectively for dealing with redress, the FCA says it “wants to see consumers receive the fairest outcome in as timely a way as possible and recognises that, in some cases, that may point to early settlement, while in others it may be appropriate to await greater legal certainty.”

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