Announced after trading hours to avoid instability within the car retail industry, the Supreme Court partially overruled the Court of Appeal’s decision, meaning dealers who accepted commissions from lenders without the knowledge of customers were not acting unlawfully so long as the amount is not considered exceptionally high.
Lord Reed ruled that the Court of Appeal’s decision was incorrect on many grounds, focusing on the idea that the finance companies bribed dealers with commissions. While Supreme Court judges acknowledged that car dealers must act fairly towards their customers, they highlighted that they don’t owe loyalty to clients.
Nevertheless, out of the three instances covered in the case, one was upheld. This was because one finance contract, entered by Marcus Johnson from Cwmbran, Torfaen, featured a commission that was worth 55% of the overall loan. Supreme Court judges ruled that the relationship the dealer had between Johnson and the lender, FirstRand Bank, was unfair – awarding Johnson the amount of commission with interest. This opens up the possibility that some drivers who entered a finance agreement that featured a DCA might still be able to get compensation.
Since the ruling, the Treasury has announced that it will work with regulators and the car retail industry to ‘understand the impact’ of the Supreme Court’s decision – making reforms to the Consumer Credit Act and Financial Ombudsman Service to improve clarity in future finance agreements.
How much compensation could drivers receive?
Despite the Supreme Court’s decision, there could still be a smaller payout for those affected who entered a finance agreement with an exceptionally high commission.