Barclays seeks to appeal Ombudsman motor finance ruling
After losing a court battle in December to challenge a decision by the Financial Ombudsman regarding motor finance, Barclays is back in court this week to appeal.
Last year, the Financial Ombudsman Service (FOS) ruled that Clydesdale (part of the Barclays Group) had unfairly paid commission to a credit broker in connection with a customer’s car loan.
This customer complained in December 2021 to the FOS about the second-hand Audi car they bought from Arnold Clark. It was noted in the complaint to the FOS that they were not made aware that a loan agreement included a commission payment worth almost £1,600.
The FOS upheld the complaint against Barclays; however, due to the potential for a series of compensation repayments, the bank sought a judicial review.
An RBC analyst predicted that Barclays, which provided motor lending between 2010 and 2019, could face up to £250m in compensation payments.
The case was heard before Mr Justice Kerr, who dismissed the bank’s application in December. As a result of losing on all three grounds of its case, the court also made a costs award against Barclays.
The banking giant applied to the court a month later to overturn Mr Justice Kerr’s ruling, which was granted. Now, the parties are at trial at the Court of Appeal on Tuesday and Wednesday.
This legal battle is separate from the landmark case that was presented to the Supreme Court in April, for which the lending industry is awaiting the highly anticipated judgment next month.
It is predicted the total provisions for the motor finance scandal could top £30bn. This has resulted in many banks, lenders, and car manufacturers setting aside hundreds of millions of pounds for potential customer compensation if the ruling goes in favour of consumers.
The case has the potential to throw the lending industry into crisis mode. HM Treasury tried to intervene in the Supreme Court case, but the court rejected their application in February.