Barclays launches legal challenge over motor finance claim
Barclays is launching a legal challenge against the Financial Ombudsman Service (FOS) over a ruling that it unfairly paid commission to a car finance broker, Sky News’ Mark Kleinman first reported.
In January, the Financial Conduct Authority (FCA) announced it was launching a probe into historic commission arrangements dating back to 2007, when the FOS first started overseeing the practice.
The high street banking giant’s legal challenge centres on the case of a single customer, known only as Miss L, but signals growing unease in the banking sector over the size of the potential compensation repayments.
Miss L was not made aware that a loan agreement she took also included a commission payment worth almost £1,600. The case was highlighted by the FCA following its investigation launch.
Early this year, RBC analysts predicted that Barclays, which provided motor lending between 2010 and 2019, could face up to £250m in compensation payments.
However, Lloyds is expected to bear the brunt of the potential fallout, with RBC forecasting £2bn in potential payouts. In its annual results in February, Lloyds Banking Group made a £450m provision for potential compensation.
Lloyds has been contacted for comment.
A Barclays spokesperson said: “We do not agree with the Financial Ombudsman Service’s decision in this case and are therefore challenging it. This challenge relates to a single, specific case and we continue to support the Financial Conduct Authority’s review into historic motor financing arrangements. Due to the ongoing nature of this case, we cannot share anything further at this time.”