Supreme Court Ruling to Bring Clarity to Car Finance Mis-Selling Saga

Strategic Insights -

A highly anticipated Supreme Court judgment, set to be released on Friday, is expected to shed light on the UK's car finance commission saga, potentially affecting millions of motorists who may be due compensation. The ruling is a culmination of a Court of Appeal decision last October, which found that "secret" commission payments in finance arrangements made before 2021 without the motorist's fully informed consent were unlawful. This judgment will have significant implications for consumers, lenders, and the wider car finance market.

Key Takeaways:

  • The Supreme Court is considering an appeal against a Court of Appeal ruling made in October last year, relating to three claimants who had each bought cars on credit and were unaware of commission payments made to the car dealer by the lender.
  • The ruling will inform the scale of potential compensation for customers, which will be overseen by the UK's Financial Conduct Authority (FCA).
  • If the Supreme Court sides with the claimants, it could mean that many people who took out a car loan before 2021 may be due a payout, although it is difficult to say at this point how many.
  • If it sides with the lenders, then it is likely to significantly limit the scope of potential payouts to motorists.
  • The FCA is still looking at compensation for potential mis-selling of discretionary commission arrangements (DCAs), which could go ahead regardless of the Supreme Court judgment.
  • A redress scheme, intended to be simpler for consumers than making a direct complaint to providers, may be implemented by the FCA, which would clarify which motor finance arrangements are included.
  • The judgment could have major consequences for the car finance industry, with about 80 per cent of new cars bought using motor finance in the UK.

Statistics:

  • 80 per cent of new cars bought in the UK are financed using motor finance.
  • If the court sides with the claimants, millions of motorists who took out a car loan before 2021 may be due compensation.
  • The FCA may implement a redress scheme, which could affect a significant number of motor finance arrangements.

Sources:

  • Wayne Gibbard, who leads the automotive finance practice at law firm Shoosmiths.
  • Mahesh Vara, a legal director for Shoosmiths.
  • The UK's Financial Conduct Authority (FCA).
  • A Court of Appeal decision made in October last year.
  • Adverts from claims management companies.