The game has changed for illegal car finance claims after the Supreme Court’s recent ruling. Today, tens of millions of car buyers could have a chance to do so. The court’s ruling could prove expansive claims. Early estimates show that the final compensation bill will still amount to billions, but far less than initial projections.
The decision was especially good news for Marcus Johnson, an unsuccessful claimant whose finance agreement was found to be “unjust” under the Consumer Credit Act. His case hinged on the dealer’s failure to disclose their receipt of commission payments. That was because this dealer had negotiated his dealer floor plan arrangement on his own behalf. This outcome underscores the need for increased scrutiny of the often predatory relationship between car dealers and auto finance lenders.
Legal analyst Richard Barnwell explains how the far-reaching ruling has eliminated most of the claimants. High compensation potential opportunities are most definitely still out there. He stated, “We believe there is still a potential for redress, for example, if discretionary commission arrangements are deemed to be an unfair relationship, redress could still be from £5bn to £13bn or more.”
Instead, the Supreme Court further narrowed the field of claimants that could be eligible. Consequently, financial analysts are updating their forecasts for what the company’s future compensation might be. Until now, lenders had estimated their potential payouts at around £30bn to £40bn. According to experts, the total liability might end up being only a fraction of that amount. Martin Lewis said, “The Supreme Court has now definitely reduced the scope of people who will be able to reclaim car finance. I take it you are alluding to the bottom end of £10bn, rather than the top £40bn.”
The court’s ruling is a short-term win for the finance company and banking bigwigs. Here’s what they were bracing, admittedly, on the extreme side, for potential financial fallout. The CCC ruling highlights the need for transparency in the commission structures used in car finance deals. Lord Reed reiterated the need for “a single-minded duty of loyalty” in these transactions. This is a good reminder that dealers have basic duties to their clients.
Mr. Johnson’s case revealed that he had been deceived about the commission structures embedded in his finance contract. This deserves to be considered a grave violation of consumer right to equal treatment, particularly in auto finance. The dealers’ large undisclosed commission payments they’ve long hidden from the public have sparked chorus for much needed regulatory change. These are meant to stop this from ever happening again.
The ongoing uncertainty on the dollar amount of compensation that car buyers may ultimately receive is still a major sticking point. Despite the ruling, new doors have been opened for certain claims. At the same time, it has unnecessarily restricted who is able to pursue financial redress to benefit injured workers. Analysts are just beginning to estimate the wider implications of this ruling and how it might affect future cases.
As Theo Leggett recently wrote for the BBC, millions of new car buyers may have claims. This is indicative of a more insidious and far-reaching effect across the industry. Financial institutions are continuing to go through the process of feeling the effects of this landmark ruling. In the meantime, both consumers and lenders are watching closely to see where the chips fall.
