Car loans commission ruling not likely until the summer as case ends

The UK's motor finance industry must wait until the summer to hear whether the Supreme Court will overturn a decision that could cost them billions of pounds.

At the close of the third and final day of hearings at the Supreme Court last week, examining appeals lodged by Close Brothers, owner of Close Brothers Motor Finance, and FirstRand Bank, owner of Motonovo Finance, against Court of Appeal rulings, president of the Supreme Court Lord Reed told the court not to expect a judgement until July.

“The court is most grateful to all counsel,” he said at the conclusion of the hearing. “The case has been very well argued on all sides, and we’re also grateful for the interveners for their assistance. 

“Parties will be keen to know when there will be a judgement. Well, this is a very important judgement, and we won’t rush it. 

“The Court of Appeal took a little under four months to give their judgement. At that rate, we will be producing ours probably sometime in July.

“A lot of it depends on the amount of agreement or disagreement between the members of the court and how much internal debate there will be. But I think if you might hope to see a judgement in July, that would be realistic.”

Earlier the court was told by Robert Weir KC, representing the respondents in the case, that their respondents’ arguments were consistent with the law as it stands and that the Court of Appeal had been right to conclude that claimants were owed a fiduciary duty.

He argued that the motor finance firms involved in the case were in breach of their fiduciary duty when consumers were signed up to agreements without their full knowledge or consent that the dealership concerned would earn significant commission.

Weir argued that dealers selected a single proposed agreement from one lender and put forward only this option to the claimants. In that way, the dealer was exercising discretion on the customer’s behalf and the tort of bribery was engaged.

Weir contested that dealers had not demonstrated an “objective undertaking”.

“The dealer is not selling you the car,” he said. “The dealer is agreeing the price with you and then moving to a credit-making journey, saying ‘I am going to source and select a finance agreement with a third party’… there is no doubt that the dealer performs distinct and separate roles.”

In the Court of Appeal case, the claimants submitted that none of them knew of commissions being paid by lenders to dealers, and they believed that dealers made their profit from the sale of the car.

If the Close Brothers and FirstRand appeal is unsuccessful, it may lead to thousands of claims from people who bought cars through motor finance agreements.

Banks and lenders have set aside hundreds of millions of pounds in anticipation of the outcome.

The outcome is so significant to the wider economy that Chancellor Rachel Reeves made an application to intervene, although this was refused by the court.  

The Treasury said it wants “a fair and proportionate judgement that ensures compensation to consumers that is proportionate to the losses they have suffered, and allows the motor finance sector to continue playing its role in supporting millions of motorists to own vehicles”.

The car finance scandal has drawn comparisons to the infamous payment protection insurance (PPI) mis-selling crisis.

The controversy erupted after an October Court of Appeal ruling dramatically expanded a Financial Conduct Authority (FCA) investigation into car finance commissions. 

The court found that car dealers receiving undisclosed commissions for arranging loans had engaged in unlawful practices.