Barclays has sharply lifted the amount it has set aside for compensation linked to historic motor finance practices. The bank has increased its provision to around £325 million after a review of its exposure. This readjustment reflects a material change in expectations, with the company treating the Financial Conduct Authority’s forthcoming redress scheme as a real and funded obligation rather than a distant regulatory risk. The decision signals that meaningful consumer restitution is now anticipated, and that funds are already being prepared to meet claims when the process goes live.
Broader Pressure Across the Banking Sector
Barclays is not alone. Several major lenders have now begun to set aside substantial reserves in anticipation of large-scale repayments to drivers. Lloyds Banking Group has lifted its total provision to around £1.95 billion following a further uplift of £800 million. Close Brothers has raised its reserve to about £300 million, more than doubling its earlier assumption.
Bank of Ireland has also raised its reserve to approximately £350 million. Even smaller institutions such as Secure TrustBank have added to their capital buffers for the same purpose. The pattern is consistent: the market is treating the redress as a financial certainty rather than an unresolved policy question.
This is occurring before the FCA has finalised a formal calculation model. The regulator continues to refine the technical definition of qualifying agreements, but banks are already reflecting this in their balance sheets. That shift matters for consumers because it indicates that lenders now expect to pay compensation. Once provisions reach this stage of maturity, they stop functioning as contingency planning and begin to operate as the early footprint of a settlement environment.
How the FCA Is Framing Unfairness
The Financial Conduct Authority is developing a scheme to address the additional interest costs that borrowers paid where intermediary influence was built into the pricing mechanism. The core issue is the relationship between commission and interest rate setting.
Under the model the regulator is building, an agreement may qualify for redress if the broker or dealer had the ability to adjust the consumer’s interest rate and financially benefit from that adjustment. The FCA also treats agreements as potentially unfair where the commission reached levels that materially lifted the cost to the borrower.
This approach removes the need for the borrower to prove personal disadvantage. The structural design of the agreement is the determining factor. FCA modelling currently indicates that average redress may reach around £700 per eligible loan.
A bank only increases its provision when exposure is regarded as probable. The step taken by Barclays and other institutions confirms that the sector expects the redress scheme to move from consultation to delivery.
What Consumers Should Do Next
Any customer who used dealer-arranged finance during the relevant period should confirm whether their agreement carries the structural features that the FCA is examining. This applies to agreements taken out between 6 April 2007 and 1 November 2024. Consumers do not need to test the mechanics themselves. The most efficient step is to determine whether their contract meets the criteria being built into the redress scheme.
This can be established through our eligibility checker, which applies the same structural indicators that the regulator is using to identify qualifying agreements. It provides a preliminary answer without requiring documents at the initial stage and confirms whether the agreement is likely to fall within the scope of the expected scheme.
