Barclays loses judicial review over FOS car finance ruling

The High Court upheld a complaint against Barclays Partner Finance in December 2024, in a judicial review brought by Clydesdale Financial Services, which operates under the Barclays Partner Finance name¹. The challenge concerned a Financial Ombudsman Service decision that had ruled against the firm in a car finance complaint¹.

The case ran alongside wider litigation on commission disclosure. On 25 October 2024, the Court of Appeal ruled in favour of three borrowers complaining about Close Brothers and FirstRand Bank, finding it unlawful for car finance companies not to tell customers about commission earned, whether discretionary or a fixed percentage¹. Both companies appealed to the Supreme Court, which confirmed in December 2024 that it would hear all three cases¹. The FCA also extended its pause on firms handling car finance complaints to cover all types of commission, not just discretionary commission arrangements (DCAs), from 26 October 2024¹.

The FCA had banned DCAs in January 2021¹. Its investigation into whether customers were overcharged between April 2007 and January 2021 followed a Financial Ombudsman ruling against Barclays over unfair commission payments¹. Around 40% of car finance deals were believed to have included DCAs¹.

The Supreme Court later overturned the Court of Appeal decision on 1 August 2025, finding that commission payments to dealers were not unlawful and that the lenders were effectively not liable for hidden commission payments¹. The FCA then consulted on a redress scheme covering deals from April 2007 to November 2024, and announced the full plan on 30 March 2026¹.

Why it matters for households

The December 2024 ruling meant the ombudsman complaint against Barclays Partner Finance stood, at a point when lenders were already barred from issuing final decisions on many car finance complaints¹. The FCA's extended pause covered all commission types from 26 October 2024, so customers with complaints about either discretionary or fixed commission waited longer for a response¹.

Under the redress scheme announced on 30 March 2026, the FCA says the average payout is likely to be around £829¹. Around 12.1m agreements are expected to be eligible, down from 14.2m under earlier plans, and the FCA estimates the scheme could cost around £7.5bn if 75% of eligible customers claim¹. Loans taken out between 6 April 2007 and 1 November 2024 are covered where the customer was not clearly told that the dealer or broker could set a higher interest rate to earn more commission, that the commission was at least 10% of the loan or 39% of the total cost of credit, or that the dealer worked with only one lender¹.

Some cases are excluded, including commission of £120 or less for agreements beginning before 1 April 2014 and £150 or less from that date, cases where no interest was charged, and high-value loans above 99.5% of other loans that year¹. Compensation has two parts: a refund of commission paid, plus estimated loss of 17% of interest paid for cases from April 2014 or 21% for earlier loans, with interest on the payout based on the annual average Bank of England base rate plus 1%, at a minimum of 3% in any year¹. Around one in three cases will have payments capped¹.

What happens next

The FCA confirmed the pause on firms handling motor finance complaints ends on 31 May 2026¹. Lenders then have three months to tell customers whether they are owed money and how much, or six months after the preparation period ends¹. Customers not contacted have until 31 August 2027 to claim under the current plan, with a deadline of 30 June 2026 for loans taken out from 1 April 2014¹. The FCA confirmed on 1 May 2026 that it had received legal challenges to the scheme from Consumer Voice, represented by Courmacs Legal Ltd, and from Volkswagen Financial Services, Mercedes Benz Financial Services and Crédit Agricole Auto Finance¹.

If a complaint is needed, the process is set out in guidance on complaining about a lender or finance company, and the Financial Ombudsman or court route explains how the two differ. Background on car finance companies covers who lends when a car is bought on finance, and Barclays is covered separately.