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Investing.com -- Barclays PLC (LON:BARC) stock gained 1.2% on Wednesday after the UK’s Financial Conduct Authority (FCA) unveiled its proposed industry-wide compensation scheme for motor finance customers, with the bank facing a relatively modest potential impact.
The regulatory body is consulting on a scheme to compensate consumers who were treated unfairly between 2007 and 2024 due to inadequate disclosure of commission arrangements in motor finance agreements, it said Tuesday.
The FCA estimates the total industry-wide redress could reach £8.2 billion if 85% of eligible consumers participate in the scheme, with the average compensation per agreement expected to be around £700.
The regulator stated that the scheme would cover regulated motor finance agreements taken out between April 2007 and November 2024 where commission was payable by the lender to the broker.
"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)," according to RBC analysts.
The proposed scheme follows a Supreme Court ruling on August 1, 2025, which found a lender acted unfairly due to high, undisclosed commission paid to brokers and failure to disclose contractual ties.
The FCA’s review of 32 million agreements found widespread failures to adequately disclose commission arrangements and contractual ties between lenders and brokers.
The regulator expects to publish final rules by early 2026, with the scheme launching simultaneously and consumers starting to receive compensation later that year. The consultation on the proposed redress scheme will close on November 18, 2025.