Barclays has launched a legal challenge over a ruling that it unfairly paid commission to a car finance broker, underlining growing anxiety among Britain’s biggest lenders about the potential scale of an industry-wide compensation bill.
Sky News has learnt that Barclays is mounting a judicial review against the Financial Ombudsman Service (FOS) over a decision last June that the bank “failed to act fairly and reasonably” in the case of a customer – known only as Miss L – who was not made aware that a loan agreement she entered into included a commission payment worth nearly £1,600.
City sources said on Monday that Barclays had recently decided to launch a legal fight but insisted that its challenge was isolated to the specific case of Miss L because of what it believed were a number of misinterpretations of the law.
According to the FOS, Miss L’s case involved a commission paid by Barclays Partner Finance to a credit broker when she took out a loan to buy a car in 2018.
The case was one of two highlighted by the Financial Conduct Authority (FCA) in January when it announced that it was responding to a large number of complaints by reviewing historical motor finance commission arrangements and sales “across several firms”.
The City watchdog did not name the individual firms it was examining, but engaged EY, the accountancy giant, to undertake a so-called skilled person’s review into the issue.
The inquiry has sparked concerns among bank investors that they could be exposed to a compensation running to tens of billions of pounds, drawing comparisons with the payment protection insurance (PPI) scandal which dogged lenders’ balance sheets for years.
In its annual results in February, Lloyds Banking Group made a £450m provision for potential compensation arising from the FCA’s probe into interest-linked commission payments.
A case involving Lloyds was also referred to in the FCA’s January statement when it said that the FOS’s decision to uphold customer…
