Barclays has revealed that it is increasing its provision for legacy vehicle-finance issues, setting aside a total of £325 million to cover historic agreements subject to consumer redress [1]. This move reflects growing pressure on lenders in the wake of the UK’s emerging car finance scandal and escalating PCP claims and other mis-selling exposures.

Barclays’ Earnings Slip After Raising Car Finance Compensation Bill to £325M

The bank reported a pre-tax profit of £2.1 billion for the third quarter (July-September), down approximately 7% year-over-year, primarily due to higher motor-finance provisions. The extra charge, an increase of approximately £235 million on top of earlier estimates for provisions for car finance refunds and fixed commission agreements, brings Barclays’ total estimate for historic vehicle-finance redress to £325 million. While Barclays noted that underlying profit (excluding the one-off charge) actually rose 4%, the added provision underlines how the car finance claims wave has become a tangible cost for the lender [2].

Industry Context & The FCA Consultation: What’s at Stake?

On 7 October 2025, the Financial Conduct Authority (FCA) published a consultation on a proposed industry-wide compensation scheme for motor-finance agreements, seeking to address historical unfair practices [3].

Scope and key terms

• The proposed scheme would cover regulated motor-finance agreements taken out between 6 April 2007 and 1 November 2024 where the lender paid commission to a broker/dealer.
• The FCA estimates that approximately 14.2 million agreements (~44% of all agreements since 2007) could fall within scope [4].
• The regulator estimates that consumers will receive around £700 per agreement, on average.

Why this scheme?

The FCA’s review found that many lenders and brokers failed to disclose important information, for example, when a dealer’s commission was linked to a higher interest rate for the customer. Without adequate disclosure, consumers may have overpaid for vehicle finance without being aware of the extent of the arrangement, prompting car finance mis-selling claims.

Mechanism and timing

• The consultation paper (CP25/27) [5] proposes that lenders contact consumers who have already complained by the time the scheme launches; others will be contacted within six months and asked to opt in.
• The FCA aims to publish final rules early in 2026, with payouts expected to begin later that year.
• Consumers still retain the option to complain directly to their lender or via the Financial Ombudsman Service, and the regulator emphasises that this route is free.

What Should You Do Now?

If you believe you may be affected by historic car-finance arrangements, now is the time to act. Here’s what you can do:

• If you’ve already lodged a complaint with your lender, you’ll be among the first to be contacted when the scheme starts.
• If you haven’t complained yet, you may still:
• Submit a complaint directly to your lender.
• Escalate to the Financial Ombudsman Service if unsatisfied.
• Wait for the scheme under the FCA’s proposed redress system, though that may take until 2026. Nevertheless, the FCA expects to pay compensation to millions of mis-sold car finance customers next year.
• It’s important to ensure your contact details are up to date; lenders are only required to reach the customers they can trace [6].
• Even if you no longer hold the vehicle or have lost documents, a claim may still be valid: firms may be required to pay compensation even when they cannot locate your full file.

In the context of PCP claims and other vehicle-finance complaints, you may wish to review your finance agreement and check whether:

• the interest rate you paid appeared significantly higher than similar deals;
• you were told explicitly about commission paid to the dealer or broker;
• the lender or dealer gave full disclosure of any commercial tie.

If you like, you may use the free template letter on the regulator’s website. The key here is to log the complaint now so your case is primed for rapid review once the scheme opens. Also, be mindful of the latest updates in car finance in the UK so you will have an idea of the next steps you need to take.

Considering the Services of a Claims Management Company?

While you may consider engaging a claims management company, there are several important caveats:

• Under the FCA’s consultation, compensation via the scheme will be free for consumers; you should not need to pay upfront fees.
• If you prefer, you can act directly; many people choose to write to their lender themselves using the free template.
• Nevertheless, some consumers prefer calling on a finance claims expert or looking for the best car finance claim company to help trace historic agreements, especially when documentation is patchy or the lender no longer holds full records.

Conclusion

The recent move by Barclays to increase its provision to £325 million underscores the significant cost that the sector now associates with historic vehicle-finance redress. With the regulatory spotlight firmly on the issue, now is a time for consumers to check their past and current motor-finance agreements, understand whether they might be eligible for a payout, and consider lodging a complaint. The proposed scheme from the FCA offers a streamlined path to redress for those affected, but acting promptly may help ensure you’re best placed when payments begin.

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References:

1. Barclays has revealed that it is increasing its provision for legacy vehicle-finance issues, setting aside a total of £325 million to cover historic agreements subject to consumer redress - found https://www.independent.co.uk/news/business/barclays-andrew-bailey-tesco-bank-bank-of-england-lloyds-b2849808.html
2. the added provision underlines how the car finance claims wave has become a tangible cost for the lender - https://meyka.com/blog/barclays-earnings-fall-after-car-finance-compensation-rises-to-325m/
3. On 7 October 2025, the Financial Conduct Authority (FCA) published a consultation on a proposed industry-wide compensation scheme for motor-finance agreements, seeking to address historical unfair practices - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme
4. The FCA estimates that approximately 14.2 million agreements (~44% of all agreements since 2007) could fall within scope - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
5. The consultation paper (CP25/27) - https://www.fca.org.uk/publication/consultation/cp25-27.pdf
6. lenders are only required to reach the customers they can trace - https://www.kslaw.com/news-and-insights/motor-finance-litigation-moves-up-a-gear-with-fca-plan