Barclays has lost a legal challenge against the Financial Ombudsman Service (FOS) over a ruling that it unfairly paid commission to a car finance broker in the latest instalment of the motor finance scandal.
At the start of this year, the FOS decided that Barclays Bank unfairly paid commission to a credit broker in connection with a customer’s car loan (Ms Lewis).
This dispute arose because Ms Lewis complained in December 2021 to the FOS about
her treatment in November 2018 when she bought a second-hand Audi car from Arnold
Clark.
She was not made aware that a loan agreement she took also included a commission payment worth almost £1,600, a complaint upheld by the FOS.
It was revealed in April that Clydesdale (trades as Barclays Partner Finance) launched a judicial review against this decision.
Despite the case relating to one person, the ruling had the potential to cause a slew of compensation repayments for the bank. RBC analysts predicted that Barclays, which provided motor lending between 2010 and 2019, could face up to £250m in compensation payments.
The case went in front of Mr Justice Kerr October, who had to examine the regulatory context of the motor commission. But on Tuesday, the High Court dismissed the appeal in a written judgment.
This is different from the landmark ruling in the Court of Appeal in October after the court ruled that a broker could not lawfully receive a commission from the lender without obtaining the customer’s fully informed consent to the payment.
Close Brothers’ application to appeal that ruling to the Supreme Court was granted last week.
Barclays was approached for a comment.