Everything came to a head after a Court of Appeal case between customers and some of the UK’s largest lending firms. The judge ruled that any part of a finance deal involving commission that’s not overtly outlined and agreed to by the consumer is unlawful.
This decision sent shockwaves through the car industry because it meant almost all car finance deals from 2007 could be affected, leaving the customer eligible for compensation. Experts originally estimated that as much as £40 billion could be up for grabs in compensation.
However, in early August, the UK’s highest court, the Supreme Court, overturned the Court of Appeal’s judgement, claiming that dealers do not have a fiduciary duty to act in their customer’s interest, rather than their own.
Lord Reed, the President of the Supreme Court, delivered the judgement, saying that; “At no point did the dealer give any kind of express undertaking or assurance to the customer that in finding a suitable credit deal it was putting aside its own commercial interest as seller”.
However, as part of the same case that covered the undisclosed commission, the Supreme Court did uphold a ruling surrounding what was deemed an “excessive” amount of commission. In this instance, commission paid to a dealer accounted for as much as 55 per cent of a car finance loan – something that has now been ordered to be paid back to the customer.
Following this, the FCA said it would consult on an official redress (compensation) scheme. The details of this have now been announced and the framework for who is eligible has been made public.
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