The UK Supreme Court has granted motor and motorcycle finance lenders permission to challenge an earlier ruling from the Court of Appeal, which sided with consumers who complained about “secret” commissions. This judgement last October ruled that it was illegal for lenders to pay commissions or concealed fixed fees to dealers without first obtaining their customers’ informed consent.
It followed a Financial Conduct Authority (FCA) decision to ban “discretionary” commissions paid to dealerships in car and bike finance deals from 2021 onwards, because they deliberately encouraged the recipients to put customers on higher rates of interest. These discretionary payments had already made involved lenders liable for redress on a large proportion of previously miss-sold loans, prior to the 2021 ban.
But the more recent Court of Appeal intervention had gone far beyond that issue, extending the range of liabilities and forcing lenders to rapidly update their commission disclosures. Many were either obliged to pause lending for vehicle purchases or cease incentives to dealerships altogether.
Primary financial service provider victims Close Brothers and the Lloyds Banking Group Black Horse operation have already set aside respective £400m and £450m provisions to cover potential future redress costs.
The Supreme Court appeal case is due to be heard between January and April 2025. Speaking to a Financial Times reporter, the FCA “welcomed the swiftness of the Supreme Court’s decision, given the potential impact of any judgement.”