The banking giant revealed statutory profit after tax was £5.5bn (£7.5bn before tax), which was up more than 50% on the previous 12-month period.
As part of its results, it also revealed a £450m provision for the “potential impact of the recently announced Financial Conduct Authority (FCA) review into historical motor finance commission arrangements”.
Discretionary commission arrangements
Last month, regulator the FCA confirmed it had launched an investigation into the motor finance market for any signs that drivers “lost out” because of commission arrangements and sales across several firms.
It banned ‘discretionary commission arrangements’ in January 2021, where car dealers and motor finance brokers received a type of commission linked to the interest rate customers paid.
As brokers were effectively able to set the interest rate, this created an incentive to sell more expensive credit to some customers, as they were rewarded with higher commission.
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The issue affects people who bought a car or van on motor finance from the likes of Barclays Partner Finance, Black Horse and Santander before 28 January 2021.
Since then, there have been a high number of complaints from customers to motor finance firms claiming compensation for commission arrangements prior to the ban.
But firms have been rejecting most complaints about this commission because they consider “they have not acted unfairly nor caused their customers loss based on the applicable legal and regulatory requirements”.
However, the investigation was sparked after the Financial Ombudsman Service (FOS) revealed it recently ruled in favour of two complainants whose claims were rejected by the firms.
And it’s heard from more than 10,000 people who fear they were charged too much for their car finance, with “many more waiting in the wings”.
Further, the FCA also revealed that claims had been brought to County Courts, some of which have been upheld, stating at the time: “There is significant dispute between some firms and consumers on whether firms have breached legal and regulatory requirements”. It added that these cases are “likely to prompt significant complaints from consumers to firms and the Financial Ombudsman”.
MoneySavingExpert.com founder Martin Lewis recently urged viewers of The Martin Lewis Money Show Live to log a complaint if they believe they’re due compensation. He predicted that the issue could become “the UK’s second-biggest reclaim after PPI”.
Car finance commission provision
Earlier this week, Barclays reported a profit before tax of £2.9bn in 2023, which is an increase from £2.6bn in 2022.
During a call with investors, the group finance director said that, due to Barclays’ low market share, the number of complaints received and uncertainty about the FCA’s final decision, it felt it didn’t need to make a provision at the time.
A Barclays spokesperson said: “While Clydesdale Financial Services Ltd, trading as Barclays Partner Finance, hasn’t offered car financing since 2019, we welcome the FCA’s recent decision to review historical motor finance commission arrangements. Any customers that have questions regarding the circumstances of their car financing loan should contact us directly.”
YourMoney.com has contacted Santander, and Lloyds Banking Group – of which Black Horse is a part – to find out if they have made similar provisions. We’ll update this news story once we hear back.
The investigation by the FCA is likely to conclude in September 2024.