A groundbreaking court ruling involving a £1,651 commission on a Suzuki Swift could trigger a devastating £13 billion compensation crisis for the car finance industry. Marcus Johnson, a 34-year-old factory supervisor from Cwmbran, unknowingly became the catalyst for this industry-shaping legal precedent after responding to a Facebook advertisement about mis-sold car finance.
The Court of Appeal’s recent judgment has determined that car dealers, acting as finance brokers, failed to properly disclose commission arrangements to customers. The ruling specifically addressed cases where commission details were either completely omitted or obscurely buried within terms and conditions, leaving borrowers unable to make informed decisions.
The Financial Conduct Authority (FCA) has already launched an investigation into “widespread misconduct” by car finance lenders, with an estimated 36% of deals involving discretionary commission arrangements. The regulatory body’s findings are expected in May 2025, but this latest court decision extends beyond discretionary commission cases, potentially affecting all finance agreements where commission was inadequately disclosed.
Major lenders including MotoNovo and Close Brothers have temporarily suspended new car finance lending while seeking to appeal the judgment in the Supreme Court. The Financial Ombudsman Service reports over 30,000 complaints about car finance commission since April 2023, highlighting the scale of potential claims.
Industry experts suggest the implications stretch far beyond the motor finance sector. Benjamin Toms from Royal Bank of Canada Capital Markets estimates the total compensation bill could reach £13 billion, significantly impacting an industry where 84% of new cars are purchased using finance agreements.
Consumers who previously received rejections for compensation claims based on the absence of discretionary commission arrangements may now have grounds to pursue refunds if any commission was paid but not properly disclosed. The FCA is currently considering expanding its complaints handling pause to cover additional types of commission in motor finance.
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