The High Court has found in favour of the Financial Ombudsman Service in a review of its decision to uphold a complaint relating to a discretionary commission arrangement (DCA) in a motor finance agreement.
The Court dismissed all three grounds of appeal brought by Barclays Partner Finance.
The Judge found that the Financial Ombudsman had interpreted FCA rules and the Consumer Credit Act 1974 correctly when deciding that the lender and car dealer involved in this case did not meet the relevant standards in place at the time.
The Financial Ombudsman was entitled to find that the dealer and the lender did not adequately disclose their commission arrangements to the borrower and that the relationship between the lender and the borrower was unfair in those circumstances.
The FCA welcomed what it said was the “additional clarity” this judgment brings to consumer complaints involving DCAs.
“We are currently reviewing the use of DCAs in the motor finance market before our 2021 ban.
“Our review seeks to understand if there was widespread misconduct related to DCAs, if consumers have lost out and, if so, the best way to make sure any compensation owed is received in an appropriate settlement in an orderly, consistent and efficient way. We gave firms more time to provide final responses to complaints about motor finance where a DCA was involved while we carried out our review.”
Barclays said it will appeal the decision. The Finance and Leasing Association (FLA), which represents banks, said it was a single case. Stephen Haddrill, director general of the FLA said: “We note the High Court’s decision, which relates to a single case and which Barclays is planning to appeal. With the Supreme Court due to discuss similar issues in spring 2025, we look forward to that process.”
