Supreme Court rules banks are not liable for hidden commissions in car finance

In a significant legal development, the UK Supreme Court made a ruling regarding car finance schemes that has major implications for consumers and lenders alike. The court decided that banks would not be held responsible for hidden commission payments made in car financing agreements before 2021 without automotive buyers having fully informed consent. This decision overturned a previous Court of Appeal ruling that had deemed such commission payments unlawful, leading to potential compensation claims for affected consumers. The judgment was particularly noteworthy as it followed challenges brought to the Supreme Court by two lenders, FirstRand Bank and Close Brothers, who contended that the earlier ruling represented an egregious error, and it was supported by arguments from the Financial Conduct Authority, which claimed the ruling overstepped appropriate limits. Despite the ruling, there remains a complex landscape of consumer rights and potential claims under the Consumer Credit Act (CCA). A specific case highlighted by the court involved a driver who was awarded £1,650.95 plus interest after his relationship with the finance company was deemed 'unfair.' This indicates that while the court favored the lenders in the broader context, there are still routes for individual consumers to seek redress for their specific situations. The Supreme Court's ruling has sparked a range of opinions among legal experts and industry analysts. Many believe it reinforces the idea that consumers have been overcharged in the past on car finance agreements, while simultaneously establishing higher barriers for those seeking compensation now. Nicola Pangbourne, a partner at the Kennedys law firm, emphasized the newly imposed hurdles faced by consumers, suggesting pronounced pessimism regarding chances of compensation. Contrarily, Lizzy Comley from Slater and Gordon highlighted the positive aspect of the ruling for those who have lost money due to mis-selling in car finance. In the midst of these developments, the Financial Conduct Authority has indicated it is contemplating whether to implement a redress scheme for consumers who could be eligible for compensation. This reflects ongoing discussions about consumer protections in an evolving financial landscape where transparency regarding commissions and fees is under increasing scrutiny. The ruling serves as a wake-up call for firms to assess their practices surrounding undisclosed commissions and to consider the fairness of their dealings with consumers as the industry navigates its regulatory environment.