Barclays triples auto finance provision

Barclays is the latest lender to up the amount set aside for auto finance misselling claims now that the Financial Conduct Authority (FCA) has released details of its proposed redress scheme, with the bank increasing its provision from £90m to £325m.

The £90m figure for potential redress was first published at the end of 2024, and re-assessed in June this year, but has now been boosted substantially.

The additional charge of £235m will be recognised in Barclays’ Q3 2025 results and is estimated to reduce its Common Equity Tier 1 (CET1) capital ratio by approximately 5 bps.

The bank said the recalculation “reflects the increased likelihood of a higher number of motor finance cases falling within the scope of the scheme contemplated by the consultation paper (which covers all discretionary commission arrangements), the FCA’s proposed approach to customer engagement, and the likelihood of a higher than anticipated level of customer redress reflecting the FCA’s proposed methodology for the calculation of redress, which is less closely linked to actual customer loss (if any) than previously anticipated.”

Barclays ceased lending in the motor finance market in late 2019, and its estimates follow the FCA proposal that historical operations from April 2007 fall within the scope of the FCA redress scheme.

Its motor finance lending was handled by its subsidiary Clydesdale Financial Services Ltd (CFSL, which was involved in a lengthy legal challenge over a Financial Ombudsman Service decision that consumer had been unfairly treated when buying a car on the grounds of the undisclosed existence of a discretionary commission arrangement (DCA). The case went to a judicial review, which was then abandoned in expectation of the Supreme Court ruling on commission payment issues.

FCA criticism

In its statement, Barclays said it “is committed to providing fair redress to motor finance customers who have a valid claim against CFSL for loss.”

But the bank went on to state: “ We are however, of the view that the scope of the scheme and proposed approach to redress outlined in the consultation paper do not accurately address actual loss (if any) suffered by customers and do not achieve a proportionate or appropriate outcome.

“Barclays intends to make representations to the FCA accordingly, to review the FCA’s response carefully, and take such other steps as it deems appropriate to achieve a fair and just outcome.”