Source: Sharecast
The case, centred on allegations of unfair treatment, saw Barclays challenge a ruling by the Financial Ombudsman Service.
According to Bloomberg, a London judge dismissed the bank's appeal, affirming that the customer’s borrowing costs increased due to a broker’s choice of an elevated interest rate tied to an undisclosed commission arrangement.
Barclays’ Clydesdale Financial Services had paid a broker £1,320 in commission related to the car loan.
The decision underscored the growing legal scrutiny over historic commission practices in the auto-finance industry.
A separate Supreme Court appeal, set for early next year, is set to further address the legality of lenders paying commissions to car dealers without borrower consent.
Lenders could face up to £38bn in claims if courts rule against them across related cases.
The Financial Conduct Authority banned such discretionary commission arrangements in 2021, citing concerns that the practice incentivised car dealers to inflate interest rates to maximise commissions.
Before the ban, brokers and lenders often profited at the expense of higher costs for borrowers.
Despite the ruling, Barclays had not made financial provisions for potential payouts, diverging from competitors like Lloyds Banking Group, which had allocated £450m for possible compensation.
Close Brothers Group, heavily exposed to motor finance, recently announced it would withhold dividends for the 2024 financial year.
At 1205 GMT, shares in Barclays were down 1.03% at 267.52p.
Reporting by Josh White for Sharecast.com.