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Barclays has followed suit with its banking peers with a major hike to its motor finance provisions after the financial watchdog launched its industry redress scheme.
The FTSE 100 titan set aside an extra £235m for the car mis-selling scandal, taking total provisions to £325m.
Barclays operated in the motor finance market under Clydesdale Financial Services from 2003 to 2019.
The bank noted the “ultimate financial impact” could differ to the funds set aside but added they represented a “reasonable estimate” of total cost expectations.
Despite the extra hit to capital Barclays announced a £500m share buyback and laid out plans to shift to a quarterly buyback.
It follows motor finance lenders hiking their provisions for the scandal after Financial Conduct Authority (FCA) revealed the first steps of its redress.
The Supreme Court sided with lenders on two out of three cases relating to the car-misselling saga in August, but upheld the case of one claimant under the grounds their 55 per cent commission was “unfair.”
However, the FCA has said the threshold for its redress – where 14.2m agreements are estimated to be eligible – will be 35 per cent.
Lloyds raised its funds to £2bn and Close Brothers near-doubled its to £300m.
Motor finance lenders take aim at FCA
On Tuesday, the boss of Lloyds Banking Group warned the redress scheme could knock two decades of profitability off the car finance industry.
Charlie Nunn, the bank’s chief, doubled down previous criticisms, adding he didn’t think the scheme was “proportionate”.
Lloyds has pulled no punches in its criticism of the Financial Conduct Authority’s (FCA) redress scheme for the car-misselling scandal, accusing the watchdog of misinterpreting the Supreme Court’s August ruling.
Nunn said: “When you look at the implication of what’s been proposed by the FCA, it’s going to potentially take 20 years of profitability off the car finance industry.”
The bank boss warned the consequences of the scheme could hamper the “investability of the UK”
FTSE 250 lender Close Brothers has also took aim at the regulator’s interpretation of the Supreme Court ruling in August.
The group said: “[Close Brothers] does not believe the redress methodology proposed by the FCA appropriately reflects actual customer loss or achieves a proportionate outcome.”
But the FCA has said it “recognises not everyone will get everything they would like”.
“But it’s vital we draw a line under the issue so a trusted motor finance market can continue to serve millions of families every year.”
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