Finance commissions ruling - live updates - autotraderinsight-blog.co.uk

Following the Supreme Court judgment, no lenders or brokers have stopped or paused lending activity. As we gain further clarity, we will share any relevant lender and broker updates here

What are the two types of car finance mis-selling cases currently being discussed?

Discretionary commission arrangements (DCAs).

This applies to about 40% of car finance deals, and is where brokers and dealers could increase the amount of interest they charged customers (without telling them) on Personal Contract Purchase (PCP) and hire purchase agreements up to 2021. If they did so, they got increased commission.

This is NOT the case the court the court ruled on

Commission disclosure complaints

This IS the decision the Supreme Court ruled on.

Last year, the Court of Appeal shocked many, including the regulator, the lending industry and politicians by ruling that if car finance agreements didn't tell consumers all details of commission, including the amount, in a clear and obvious way, not just buried in the small print of the finance paperwork, they were acting unlawfully.

This applies to up to 99% of car finance (so all those with DCA cases as well)

The Supreme Court ruled on three associated cases. 2 appeals were upheld (meaning the lenders were successful in their appeal and the consumers’ cases were dismissed). A third, was dismissed, meaning the Court ruled in favour of the consumer.

The issues assessed by the Supreme Court were:

Did a lack of commission disclosure constitute a bribe?

Does a retailer have a special responsibility to the consumer to act in their best interest (fiduciary duty)?

Was the amount of commission paid for a particular deal considered fair?

Fiduciary duty: It was found that retailers do not owe a fiduciary duty to a consumer. This means that a retailer is not obliged to act solely in the consumer’s interest.

Bribery / secret commission: because of the above finding, this claim is rejected as there is no legal basis for it.

One of the claims (Johnson vs. FirstRand), made under the Consumer Credit Act, was upheld, with the Court ruling that the size of the commission paid was unfair.

The Court pointed out that their judgment was based on the facts of this specific case.

Although the consumer was presented with the information at the time, this was not deemed sufficient.

Will lenders pause trading again?

We haven’t seen any sign of this so far, with lenders continuing business as usual for now.

In October, when the original Court of Appeal judgment was handed down, we saw a number of lenders pausing business in the immediate aftermath as they understood the ramifications on their processes. They’d just been told that the way in which they’d been selling finance (via retailers) was unlawful, so it stopping this was a logical thing to do.

Could some lenders go out of business?

This still remains uncertain until the full details of the redress scheme are known.

Supreme Court’s ruling on finance commissions - your questions answered

During the webinar, we received many questions from our audience, and we answered the most frequently asked ones in this FAQ blog. Check it out to find answers to the questions in the following themes: