Car finance compensation denied by Supreme Court
Large-scale claims now unlikely as court (mostly) sides with finance companies
You’ll probably have been served all manner of adverts recently from claims companies keen to suggest that compensation may be forthcoming for car finance customers. That was thanks to a case heard by the Court of Appeal, suggesting that customers had been duped in the process - specifically that commission payments from car finance companies to dealers amounted to bribes, and dealers owed a duty of loyalty to customers. (The word ‘fiduciary’ was being Googled as frantically today as ‘furlough’ was in May 2020.)
Now the panel of justices that comprise the Supreme Court has overturned the decision made by the Court of Appeal, in two of the three cases presented to it. So on the side of the argument wagered by the finance companies, essentially, rejecting the idea of commission as bribes alongside the implied obligation that the dealer look out for the customer’s best interest. The ruling means a lot of those claims will go unfulfilled. The lenders, Close Brothers and FirstRand, took the case to the Supreme Court after the Court of Appeal ruled last October that suggested nearly all commission agreements were unlawful.
Where the Supreme Court agreed with last year’s decision (albeit for different reasons) was in the case of Marcus Johnson; the commission paid to a dealer from the finance company - in his case FirstRand, in the UK as MotoNovo - was 55 per cent of the cost of the credit. Supreme Court President Lord Reed said that the amount, undisclosed to the customer, was sufficiently high that it was a “powerful indication that the relationship between Mr Johnson and the finance company was unfair” - a key distinction. He will receive the credit amount as compensation, plus interest.
Quite what this means more broadly remains to be seen, although it seems likely a more limited compensation scheme concerned with ‘discretionary commission arrangement’ loans - a type of arrangement now banned - will go ahead. This is currently under consideration by the Financial Conduct Authority, which had previously suggested that it could prospectively launch within six weeks of the Supreme Court’s ruling. So worth keeping eyes open for that.
Regardless, a reversal of last year’s decision means that any large-scale compensation payday - one estimated to be in the region of £44bn, and therefore feared by the UK government for its wider impact on the market - is now off the table. That will be considered a blow for consumers in many corners, and means it is unlikely to be the end of the story. Those with the time and a more detailed understanding of case law might like to peruse the Supreme Court’s 110-page ruling; alternative viewpoints, as ever, are welcome below.
And hope that if they do go pop people's personal data is safe.
kwits shilling these companies. Absolutely sick of the adverts and I don't follow the tts.I’ve no issue with dealers getting commission provided it is clearly stated. Don’t think they should have to declare commission amount either. In essence I agree with the Supreme Court ruling here which largely covers this.
However Discretionary Commission Arrangements (DCAs) is completely wrong and hope compensation is issued and anyone caught is fined.
I ve no issue with dealers getting commission provided it is clearly stated. Don t think they should have to declare commission amount either. In essence I agree with the Supreme Court ruling here which largely covers this.
However Discretionary Commission Arrangements (DCAs) is completely wrong and hope compensation is issued and anyone caught is fined.
My understanding is when DCA s were in place they weren t classed as being wrong. the regulator condoned the set up.
Later they decided they were wrong, and they outlawed them, and the industry complied with the new set up.
Today the judges said the car dealers didn t owe the customer fiduciary duty, and that the agreements were commercial, where the lender, dealer and customer all had to agree they were fully happy with the terms before they could proceed, basically looking out for their own interests.
So, from a purely business standpoint, leaving morality and personal opinion to one side, what s anyone done wrong that would merit compensation?
I ve no issue with dealers getting commission provided it is clearly stated. Don t think they should have to declare commission amount either. In essence I agree with the Supreme Court ruling here which largely covers this.
However Discretionary Commission Arrangements (DCAs) is completely wrong and hope compensation is issued and anyone caught is fined.
I ve no issue with dealers getting commission provided it is clearly stated. Don t think they should have to declare commission amount either. In essence I agree with the Supreme Court ruling here which largely covers this.
However Discretionary Commission Arrangements (DCAs) is completely wrong and hope compensation is issued and anyone caught is fined.
Ultimately if the finance companies had lost they fall out would have been catastrophic and potentially put an end to ANY finance agreements, not just cars.
As the poster said, the dealer discretionary part which is a different matter, does deserve to be addressed.
Yes, I did it with the first "good" car that I bought (well reasonable, BMW 320i) , and it actually worked pretty well. Ended up buying the car at the end of the agreement for about 2k less than WBAC offered for it.
Last couple of cars I've just bought outright, but I understand that PCP can and does work for some people , as long as you know what you're getting yourself in for.
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