Money expert Martin Lewis has confirmed that big bank Barclays is offering drivers an early payout on the £829 ‘mass redress’ compensation scheme.
The FCA is currently overseeing a longstanding compensation scheme for drivers who took out motor finance which was later found to have been mis-sold. Earlier this year, the financial regulator unveiled a scheme for drivers who had taken out car finance, after it ruled that approximately 12.1 million finance deals were mis-sold by various lenders between 2007 and 2014.
According to Money Saving Expert, a total of £7.5Bn is set to be paid out across the 12.1M deals involving Discretionary Commission Arrangements (DCAs), which have since been banned. DCAs allowed car dealers and brokers in increase interest rates on loan deals and pocket the difference, but the borrower was not made aware of how the interest rate had been inflated.
But a legal challenge by three firms has thrown a spanner in the works, with a delay to the payouts into 2027 while the case is heard. However, Barclays is offering its affected customers an early settlement which will secure you your compensation cash sooner and at the same payout amount that the scheme is expected to deliver (£829).
The only risk is that if the case is later changed to increase the payout, you will no longer be eligible as the Barclays payout is ‘final’, effectively cashing you out of the compensation scheme. But if the scheme falls apart, you also got your payment secured before that.
Money expert Martin Lewis broke the news as he explained: “So we’ve just had the news that Barclays Partner finance is to pay out early car finance misselling claims. It’s the first one to do it, companies are allowed to do it under the FCA’s regime.
“Now this is really interesting, because the main mass redress scheme is on hold until February, when four firms are challenging it in court. And even if that were to go through and challenges fail it would still be the end of 2027 until 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 levels so you would get the same amount.”
He then revealed that many of his followers are asking for advice about whether they should take the money now or wait out the scheme’s payouts.
Martin added: “First of all, you’ll get your money now, at the same level as the mass redress scheme. Secondly, it will be simple, it will write to you, 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, it would be much more complicated to get a claim in. You would have to make an individual claim yourself and then go through to the Ombudsman and then 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.”
