Barclays Increases Car Finance Redress Provision to £325m

Barclays has significantly increased the amount it has set aside to cover potential payouts linked to historic car finance mis-selling claims, underscoring the scale of uncertainty facing major lenders as the Financial Conduct Authority (FCA) nears final decisions on industry redress.

As of 30 September 2025, Barclays raised its motor finance provision to £325 million, up by £235 million from earlier estimates. The bank said this reflects growing clarity on how the FCA’s proposed compensation scheme might work and the likelihood of a higher volume of redress cases than it had previously anticipated.

This figure forms part of a broader trend among UK banks. According to industry data, lenders’ total provisions for motor finance issues exceeded £2 billion in 2025 as firms prepare for significant remediation and operational costs arising from historic commission arrangements.

Why Barclays Has Increased Its Provision

The provision hike follows the FCA’s consultation on a motor finance compensation scheme designed to address historic undisclosed commission arrangements in personal contract purchase (PCP) and hire purchase (HP) agreements taken out between 6 April 2007 and 1 November 2024.

Under the proposed scheme, the FCA estimates that over 14 million agreements (around 44 per cent of agreements since 2007) could fall within scope and may be treated as unfair if commission was not properly disclosed. The regulator has suggested average payouts of around £700 per agreement, though individual amounts could vary widely.

Barclays’ provision adjustment follows both regulatory developments and legal judgments. The bank itself noted that uncertainties remain over the timing, methodology and final scope of redress. Its accounts state that the ultimate financial impact could differ from the amount provided, and the legal and regulatory outcomes remain uncertain.

How Barclays’ Latest Figures Compare Across the Sector

Barclays is not alone. Other lenders have disclosed sizeable redress provisions:

• Lloyds Banking Group has increased its total motor finance provisions to around £1.95 billion, following multiple uplifts throughout 2025.
• Santander UK had earlier set aside about £295 million for motor finance compensation.
• Close Brothers Group recently raised its reserve to roughly £300 million.
• Bank of Ireland (Northridge Finance) moved its provision to about £350 million, according to industry reporting.

Collectively, such provisions contribute to expected sector totals exceeding £2 billion for 2025, reflecting mounting cost exposure as lenders prepare for redress and operational responses to complaints.

Consumer Impact and What This Means for You

These provisions underscore a growing trend: lenders are accepting that historic motor finance practices may have left customers out of pocket. Anyone who took out a PCP or HP agreement through a dealer before the FCA’s January 2021 ban on discretionary commission arrangements may have grounds for a complaint, especially if a dealer could adjust your interest rate and you were not adequately told about the commission impact.

Barclays ceased lending in the motor finance market in 2019, but customers with agreements funded by Barclays Partner Finance during the relevant period are still included in the redress consideration.

Under current FCA proposals, lenders may be required to contact consumers with existing complaints once a final redress scheme is implemented. The FCA has suggested that customers who complain before a scheme begins could receive earlier payouts.

Industry Perspective

Market analysts say Barclays’ decision to nearly quadruple its provision demonstrates how seriously the sector is taking potential redress liabilities. The FCA’s estimates of redress costs across the industry, discussed in official consultation materials and wider expert coverage, run into billions of pounds when reflecting likely participation rates and average compensation values.

However, uncertainties remain around the final design of the scheme, the applicable thresholds for compensation and how losses will be calculated. Consumers and lenders alike are watching for the FCA’s final rules and statutory instrument expected in early 2026.

Mis-Sold Expert Support

If you financed a vehicle through a dealer before 2024 and believe undisclosed commission may have increased your interest rate, you can check your agreement with Mis-Sold Expert.

You can claim without using a claims management company; you can go to your finance provider and then to FOS, for free. Additionally, the FCA is introducing a free consumer redress scheme.