Blow to millions of motorists over car finance mis-selling as Supreme Court overturns landmark ruling
by Danielle de Wolfe · LBCBy Danielle de Wolfe
Millions of motorists have missed out on compensation over car finance mis-selling after a Supreme Court rules agreements lawful.
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The highly-anticipated Supreme Court ruling on the car finance scandal was announced on Friday afternoon, with the ruling having billion-pound consequences on prominent banks if upheld.
The landmark ruling concerned the non-disclosure of commission - a factor that impacts consumers in around 99% of all car finance deals.
Speaking on Friday, Supreme Court President, Lord Reed, instead chose to overturn a previous judgement handed down by the Court of Appeal in the case of three motorists who were unaware of the 25% commission.
it means that finance companies did not deceive customers by not disclosing hidden fees.
The Financial Conduct Authority (FCA) has said it will set out exactly how an industry-wide judgement will impact consumers in the coming weeks.
Lord Reed outlined the history of the case and wide-reaching ramifications as part of his ruling.
He said "we are giving judgment at this time to prevent market disorder," as he outlined the timing of the decision, which took place after trading hours.
He added the payments "were not a bribe".
When a car is purchased on finance, it effectively acts like taking out a loan, with the cost of the vehicle paid off in monthly insurance.
These loan repayments have interest applied which is organised by brokers, who earn money in the form of a commission as a percentage of the interest payments.
Last year, the Court of Appeal ruled in favour of three motorists who were unaware of the 25% commission paid to dealerships by finance companies.
On Friday, the Supreme Court judge outlined that in order to understand the court's decision, it was important to highlight the dealer's commercial interest in securing the deals.
It marks a partial win for lenders.
The ruling sees them avoid potentially having to pay compensation to millions, however, the court sided with one of the claimants, a Mr Johnson, with the court awarding him individual compensation based on the circumstances in his individual case.
Lord Reed said the court upholds Mr Johnson's claim, explaining: "that the relationship between him and the finance company was unfair".
"We award him the amount of commission plus interest," Lord Reed said, adding: "other customers claims are rejected".
Following the judgement, a Treasury spokesperson said: "We respect this judgment from the Supreme Court and we will now work with regulators and industry to understand the impact for both firms and consumers.
“We recognise the issues this court case has highlighted. That is why we are already taking forward significant changes to the Financial Ombudsman Service and the Consumer Credit Act.
"These reforms will deliver a more consistent and predictable regulatory environment for businesses and consumers, while ensuring that products are sold to customers fairly and clearly.”
It comes as consumer expert Martin Lewis gave his initial reactions to the ruling.
Taking to X, the presenter and finance expert wrote: "#SupremeCourt #CarFinance Why did it rule one case unfair and due compensation. Under Consumer Credit Act allows courts to take account of number of factors and is case sensitive."
This is a breaking news story, more to follow...