Nicole Keeling
Barclays has set aside £90 million to cover potential claims against its past motor finance business, according to its 2024 annual report. This comes after the lender tries to address the legal implications of existing litigation over secret commissions paid by motor finance lenders to car dealers.
This follows the October 2024 Court of Appeal judgment that held automobile dealers liable for accepting commission payments from lenders before obtaining the informed consent of consumers. The decision has opened the door to widespread industry implications, with the Financial Conduct Authority (FCA) already weighing up the matter, and a Supreme Court appeal scheduled in April 2025. Barclays, which wound down its motor finance division around the end of 2019, accepted that its past business could be caught by any future redress scheme operated by the FCA.
Barclays presented the uncertainty about the provision within its financial report, noting the extent of the redress remained under review. The bank indicated that it has given an indication of the monetary impact by taking into consideration several factors, including the validity and severity of the complaints and when repayments likely to be owing were made. However, Barclays also clarified that the final cost could drastically differ from the initial £90 million provision reserved, pending all assumptions remaining to shift as fresh details are unveiled.
The £90 million provision is in line with that of other institutions, although lower than some of their competitors. Close Brothers has reserved £165 million, while Santander has reserved £295 million for the same type of problem. Lloyds, for its part, expects to reserve up to £450 million in order to deal with the scandal’s legacy of motor finance problems.
Despite the large provision, Barclays is still being prudent, given that it shut its motor finance unit years ago and now only needs to contend with the consequences of its previous dealings. The bank rationalised that its provision covers claims against its business before 2019 when it had a relatively modest share of the UK’s motor finance market.
The ongoing FCA investigation, which has deferred Barclays’ obligation to respond to any motor finance commission complaints until December 2025, remains a significant source of uncertainty. The FCA’s final recommendation on the matter is expected in May 2025. Barclays has committed to closely monitor the situation and update its provisions if there are new developments.
Barclays’ big reaction to the issue is in stark contrast to other banks that have been equally impacted, with lawyers estimating that the claims will set the UK finance sector back billions of pounds. Consumers may be due compensation of as much as £1,100 per mis-sold contract, with commission payments estimated within nearly 95% of car finance agreements before 2021.
The full financial reports, such as the £8.1 billion pre-tax 2024 profit of Barclays bank, can be found in Barclays’ official report here.