Martin Lewis worried car finance compensation ruling 'could do more harm than good'
The bombshell car finance ruling is due today, and Martin Lewis has issued a warning.
Today the Supreme Court will announce its decision on whether motorists will be reimbursed on their hire-purchase agreements. Car dealers have been put under the spotlight following concerns over "secret" commission pocketed from banks and other finance firms.
In October last year, the Court of Appeal ruled the hidden payments made before 2021 without the motorist's consent were unlawful. Ahead of the ruling which is set to take place late this afternoon, Martin Lewis shared his fears on the outcome of the court case - which could see 23 millions drivers owed compensation. It comes after news anyone buying fuel next week will be given '£15 charge' warning by The AA.
"This is going to be a shock announcement coming. It has ramifications not just for car finance firms but right across the financial services sector," the founder of MoneySavingExpert.com said. "Depending on what the decision is, it could even have ramifications across the economy."
He added: 'If the Supreme Court upholds the Court of Appeal's decision the knock on effects could be substantial on other forms of lending and on the economy. To be honest it could shake the foundations of consumer lending in the country, meaning less possible available credit for many. So much so that I have concerns that it could do more harm than good."
His comments come after it was ruled three motorists, who all bought their cars before 2021, had not been told either clearly enough or at all that the car dealers, acting as credit brokers, would receive a commission from lenders for introducing business to them, and should receive compensation. Two lenders, FirstRand Bank and Close Brothers, took the row to the Supreme Court, telling a three-day hearing in April that the decision was an 'egregious error'.
The outcome of the ruling could have major consequences for the industry, with the FCA telling the Supreme Court last year that almost 99% of the roughly 32 million car finance agreements entered into since 2007 involved a commission payment to a broker.
The three drivers, Marcus Johnson, Andrew Wrench and Amy Hopcraft, all used car dealers as brokers for finance arrangements for second-hand cars, all worth less than £10,000. Only one finance option was presented to the motorists in each case, with the car dealers making a profit from the sale of the car and receiving commission from the lender.
The commission paid to dealers was affected by the interest rate on the loan. The schemes were banned by the FCA in 2021, with the three drivers taking legal action individually between 2022 and 2023. After the claims reached the Court of Appeal, three senior judges ruled that the lenders were liable to repay the motorists the commission, as there was 'no disclosure' of the commission payments in Ms Hopcraft's case, and 'insufficient disclosure' in the case of Mr Wrench.
In Mr Johnson's case, the judges found he had received 'insufficient disclosure' about the commission to give 'fully informed consent' to the payment. Lady Justice Andrews, Lord Justice Birss and Lord Justice Edis said that while each case was different, 'burying such a statement in the small print which the lender knows the borrower is highly unlikely to read will not suffice' as enough to properly inform a motorist about the commission.
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Times
5 hours ago
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How drivers were sold a car finance compensation fantasy
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