Barclays has confirmed it will start making early compensation offers to some car finance customers, ahead of the outcome of a legal challenge to the Financial Conduct Authority's (FCA) proposed compensation scheme.

The FCA said it would welcome lender settlement offers as long as customers do not receive a worse deal than under its central scheme. The FCA expects only a minority of claimants to receive early offers. Most will have to wait for the court case.

The central scheme faces challenges from Volkswagen Financial Services, Mercedes Benz Financial Services and Credit Agricole Auto Finance. The Upper Tribunal will hear the challenges from 16 February to 3 March. The source says compensation is unlikely to be paid until late next year.

Stephen Braviner Roman, the FCA's general counsel and co-lead on the motor finance project, said: "Fair settlement offers could result in some people getting money sooner. It's clear they want the choice."

Barclays said each offer will be calculated using the FCA's redress methodology. It said it will explain what accepting a "full and final settlement" means. Claimants will be contacted "in the coming weeks," but not all customers whose complaints were acknowledged by 1 October 2026 will receive an offer.

The FCA said lenders must make clear that accepting an offer means customers can keep the payment even if the final scheme pays less. Accepting an offer also removes a customer from the scheme and ends further involvement from the Financial Ombudsman. The FCA has published a factsheet to help drivers decide, and will list lenders making early offers.

The FCA estimates the scheme could cost the industry up to £9.1bn, including administrative costs. It expects average payouts of about £829 across about 12 million loans taken out between April 2007 and November 2024. The payouts relate to discretionary commission arrangements, under which dealers received commission based on the interest rate charged, often without customers being told.

Consumer Voice said the proposed scheme leaves "too many people short-changed."