Shares of Barclays PLC (LSE:BARC) rose 1.2% on Wednesday after the UK Financial Conduct Authority (FCA) announced a proposed industry-wide compensation scheme for motor finance customers, suggesting a relatively limited financial exposure for the bank.
The FCA said on Tuesday that it is consulting on a redress program aimed at compensating customers who were treated unfairly between 2007 and 2024, due to insufficient disclosure of commission arrangements in vehicle finance agreements.
According to the regulator, the total industry payout could amount to £8.2 billion, assuming 85% of eligible consumers participate in the scheme. The average compensation per affected agreement is estimated at about £700.
The scheme would apply to regulated motor finance agreements arranged between April 2007 and November 2024, where a commission was paid by the lender to a broker, the FCA added.
“We have updated our motor finance impact model which implies total required provisioning at LLOY (c.£850m), SAN UK (c.£350m), BIRG (c.£210m), BARC (c.£80m), CBG (c.£170m),” wrote RBC analysts in a note, suggesting Barclays’ potential exposure could be modest compared to peers.
The proposed scheme stems from an August 1, 2025 Supreme Court ruling, which determined that a lender acted unfairly by paying undisclosed commissions to brokers and failing to reveal contractual relationships that could influence loan terms.
In its review of 32 million finance agreements, the FCA uncovered widespread shortcomings in how lenders and brokers disclosed commission structures and their financial ties.
The regulator plans to finalize the rules by early 2026, with the scheme set to launch concurrently, allowing customers to begin receiving compensation later that year. The consultation period for the proposal will remain open until November 18, 2025.
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