Barclays appeals against ruling which sparked FCA investigation into motor finance industry

  • Barclays Bank says it will appeal ruling by Financial Ombudsman Service
  • Watchdog found that banking giant mis-sold car finance to a customer
  • Case was cited by the FCA when it launched its investigation into the motor finance industry
  • Lloyds Banking Group considering appeal in similar case – also highlighted by the FCA

Time 8:33 am, April 10, 2024

Barclays has launched an appeal against a landmark ruling which sparked the FCA’s investigation into the motor finance industry.

When the watchdog announced its inquiry, back in January, it cited the case of a ‘Miss L’, who was found to have been mis-sold car finance by Barclays Partner Finance.

The Financial Ombudsman Service (FOS) found that the customer had not been made aware that her package included a £1,600 commission to a credit broker – in her case the dealer she bought the vehicle from.

The case is what initially alerted the FCA to the situation and could now pave the way for hundreds of millions of pounds in compensation being paid out.

However, Barclays now says it does not agree with the FOS ruling and has began a legal challenge against the decision.

A Barclays spokesman told the Telegraph: ‘This challenge relates to a single, specific case and we continue to support the FCA’s review into historic motor financing arrangements.

‘Due to the ongoing nature of this case, we cannot share anything further at this time.’

The news comes after Lloyds Banking Group – which owns Black Horse – put aside £450m to deal with potential compensation arising from the FCA probe.

The FCA also referenced a case involving the bank when it launched its investigation in January.

That incident, involving a ‘Miss Y’, saw the customer charged 5.5% interest on a hire purchase agreement, when she could have been paying as little as 2.49%.

A Lloyds Banking Group spokesman told the Telegraph it was also reviewing the FOS ruling against it, but said the group had not yet decided whether or not it would lodge an appeal.

How the motor finance crisis has unfolded so far

The FCA inquiry, which is expected to last until September, centres around now-banned ‘discretionary commission arrangements’, which allowed brokers and car dealers to make up interest rates to increase their commission.

The practice was outlawed in 2021 but tens of thousands of people could now be due compensation after overpaying.

The watchdog is using its powers under S166 of the Financial Services and Markets Act 2000 to identify cases of potential wrongdoing by motor finance firms.

The news has got many in the industry feeling twitchy, especially after Martin Lewis broadcast a special programme about the crisis earlier this year.

The consumer champion also launched a free reclaim tool and guide via his company MoneySavingExpert, which received more than a million enquiries in its first month.

Dealers who are concerned about what the scandal could mean for them can view Lawgistics’ handy online guide.

Main image: Barclays Bank’s UK headquarters in Canary Wharf (PA Images)

Jack Williams's avatar

Jack joined the Car Dealer team in 2021 as a staff writer. He previously worked as a national newspaper journalist for BNPS Press Agency. He has provided news and motoring stories for a number of national publications including The Sun, The Times and The Daily Mirror.

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