Barclays Near-Quadruples the Money It Has Set Aside for Motor Finance Repayments
Barclays has made a significant increase in its motor finance provisions.
Barclays has raised the amount of money it has ringfenced for motor finance repayments to around £325 million. This marks a move from contingency planning to compensation funding, with money now allocated for affected drivers as part of forward planning.
Several other lenders have expanded their reserves in the same direction. Lloyds Banking Group now holds around £1.95 billion for motor finance repayments. Close Brothers has set aside roughly £300 million, and Bank of Ireland approximately £350 million. Secure Trust Bank has added funding as well. The wider industry is preparing its own reserves for the same restitution outcome.
What Barclays Said
In a press statement, Barclays said the increase to its reserve reflects its expectation that a larger number of motor finance contracts will fall within the scope of the FCA’s proposed scheme. The bank also said the consultation points toward a broader approach to customer contact and a level of compensation that may exceed earlier assumptions. Barclays explained that this is because the FCA intends to base repayment on the structure of the commission model rather than on a strict calculation of individual financial loss.
Why the Regulator Is Intervening
The Financial Conduct Authority is focusing on how commission shaped the cost of borrowing for drivers. Many dealer-arranged agreements allowed brokers to influence the interest rate and benefit financially when the rate rose. The customer carried the extra burden without visibility of the incentive behind it. The regulator treats this structure as unfair and is now building a remedy for affected borrowers.
The FCA’s consultation sets out a compensation model based on how the agreement was priced.
If the commission represented at least 35% of the total cost of credit and at least 10% of the loan amount, the contract falls inside the repayment category. The restitution would also include interest calculated at the Bank of England base rate plus 1%, which acts as compensation for the time the customer went without that money.
FCA modelling places the total projected cost for the sector at between £8.2 billion and £9.7 billion, depending on participation levels. Around 14.2 million agreements, representing approximately 44% of contracts since 2007, may fall within scope under this approach.
Once the consultation ends and the final rules are confirmed, firms must set up their systems, identify qualifying agreements, and notify customers. Provided everything proceeds as planned, the first compensation payments are expected in 2026. Meanwhile, firms must issue final responses to related complaints by 4 December 2025.
Who Is Likely to Qualify
Contracts are assessed by structure rather than by individual complaint history. Eligibility arises where a broker could alter the interest rate for financial gain, where commission raised the total cost of credit, or where exclusive commercial ties influenced which lender the customer was directed to. This covers regulated agreements taken out between 6 April 2007 and 1 November 2024.
What Drivers Should Do Now
Any consumer who arranged their car finance through a dealer during the period above may hold an agreement that qualifies. The next step is to check whether the contract carries the features the FCA is testing. We provide an eligibility checker that reviews the structure of the loan and confirms whether it is likely to qualify.
The FCA’s modelling indicates that repayments may average around £700 per agreement, sometimes higher. Checking eligibility now offers early clarity and positions drivers ahead of the rollout of the repayment framework.
