The Supreme Court is set to review a significant motor finance case following the Court of Appeal’s decision on commission practices.
The decision to grant permission for an appeal was made in response to the Court of Appeal’s ruling in the case known as Hopcraft. This ruling found it unlawful for car dealers to receive commissions from lenders without obtaining customers’ informed consent. The ruling applies to both discretionary and non-discretionary commissions, sparking widespread concern within the industry.
The Financial Conduct Authority (FCA) has welcomed the Supreme Court’s swiftness in granting the appeal, highlighting the potential impact of the decision on the motor finance market and consumers reliant on it. There is a possibility that the FCA may formally intervene to lend its expertise during the substantive appeal process.
The appeal concerns three cases, with Close Brothers and FirstRand Bank being the defendants. Close Brothers filed its application on 22 November and received confirmation of permission shortly after. The appeals are scheduled for the Hilary Term, between 13 January and 16 April 2025.
The FCA has noted the potential for significant compensation payouts if the appeal is rejected, with analyst estimates of compensation ranging from £6 billion to £44 billion. Consequently, the FCA is proposing an extension for motor finance complaints in cases involving non-discretionary commissions.
Additionally, FCA chief executive Nikhil Rathi has indicated on Martin Lewis’s ITV show that a redress scheme might be established. This suggests increasing scrutiny and regulatory involvement in the motor finance sector.
Charlie Nunn, chief executive of Lloyds Bank, expressed concerns during the FT Global Banking Summit. He commented on the courts’ independent decisions having significant retrospective economic impacts, reflecting the weight of the potential outcomes of the appeal.
The forthcoming Supreme Court review of motor finance commission practices marks a pivotal moment for the industry, with potentially far-reaching consequences for financial regulation and consumer protection.
