Lenders triumph in car finance case at Supreme Court, dealing a setback to motorists
The Supreme Court has overturned a ruling that could have led to millions of motorists receiving compensation for mis-sold car finance, affecting thousands of cases across the UK.
In a landmark decision, the court ruled that the Court of Appeals' ruling on car finance cases was incorrect. The ruling had previously found in favour of motorists who claimed they were not informed about commissions received by car dealers and brokers.
Three motorists, including Mr. Johnson, were among those who had not been told clearly or at all that car dealers would receive a commission from lenders for introducing business. Mr. Johnson, for instance, paid £1,650.95 in commission as part of his finance agreement with FirstRand.
The Financial Conduct Authority (FCA) intervened in the case and told the UK's highest court that the Court of Appeal ruling "goes too far". The FCA will now decide whether it will consult on a compensation scheme by Monday.
The judgment was in response to a case brought by one claimant, Marcus Johnson, who was awarded individual compensation due to the circumstances in his case. However, the court's decision significantly limits the scope of potential payouts to motorists.
The second case, which is ongoing at the FCA, focuses on discretionary commission arrangements (DCAs), a practice banned by the FCA in 2021. Under DCAs, brokers and dealers increased the amount of interest they earned without telling buyers and received more commission for it.
The FCA is reviewing historical motor finance commission arrangements across multiple firms. The review found that a significant number of consumers had been affected before the ban. The FCA is considering a consumer redress scheme for appropriate compensation, with estimates suggesting that around 40% of car finance deals between 2007 and 2021 could be eligible for compensation.
All firms under review deny acting inappropriately. The FCA is using its powers to review historical commission arrangements and finalize details of the redress scheme, potentially influenced by ongoing Supreme Court rulings related to a separate but connected car finance case.
Two lenders, FirstRand Bank and Close Brothers, took the case to the Supreme Court, challenging the initial ruling in favour of the motorists. The motorists in the Supreme Court case used car dealers as brokers for finance arrangements for second-hand vehicles worth less than £10,000.
The FCA's chief executive has said there are cases where there could be arrangements that have been unfair and will study the judgment. If the FCA decides to consult on a compensation scheme, it could lead to further developments and potential payouts for affected motorists.
[1] Supreme Court ruling overturns car finance case that could have led to millions in compensation
[2] Supreme Court rules against motorists in car finance case
[3] FCA reviews motor finance commission arrangements
[4] FCA bans discretionary commission arrangements in motor finance
- The Supreme Court has overturned a previous ruling that could have resulted in millions of motorists being compensated for mis-sold car finance, potentially impacting thousands of cases across the UK.
- In a recent decision, the Supreme Court ruled against motorists in a car finance case, limiting the scope of potential payouts for those who were not fully informed about commissions received by car dealers and brokers.
