The car finance scandal has been a hot topic since allegations surfaced about unfair practices within the sector. Many customers have found themselves embroiled in complicated agreements that were less than transparent.
On Friday, the Supreme Court sided with major lenders in the car finance scandal, delivering a blow to car buyers affected.
Many motor finance customers will not be entitled to redress for mis-selling following the Supreme Court’s ruling that car dealers did not owe customers a fiduciary duty.
A number of significant developments did however emerge as a result of the ruling:
Firstly the Supreme Court did not appear to overturn the ruling but in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance, ruled that the relationship between Mr Johnson and First Rand was unfair within the meaning of section 140A of the Consumer Credit Act 1974 and that Mr Johnson was therefore entitled to succeed in his claim on that basis.
Secondly the FCA has now confirmed that Friday’s Supreme Court ruling has provided much clarity on what is considered unfair, saying that before this judgment, there were differing interpretations coming from different courts.
Thirdly, the latest announcement by the FCA brings a glimmer of hope to those affected. The FCA has now announced that it will consult on an industry-wide redress scheme that could begin paying out from next year, which could cost lenders between £9 bn and £18 bn. It has however been estimated that most individual claimants will probably receive less than £950.00 per agreement.
So who can claim? Much will depend on whether the commission payments were legal, and the FCA is to propose rules on how lenders should consistently and fairly decide whether someone is owed compensation and how much.
The consultation will launch by early October, and if the compensation scheme goes ahead, the first payments should be made in 2026.
People who have already complained to the FCA do not need to do anything, the regulator said.
Motorists who are worried they were not told about commission and think they may have paid too much to their motor finance lender have been urged to complain now.
As the situation develops, affected customers need to stay informed and await further guidance on eligibility criteria when this is released.
It is hoped that the decision to provide payments to at least some of those affected reflects a growing recognition of the need for accountability within the finance industry and a recognition of consumer rights.
A copy of the Supreme Court’s judgement can be found here:
