A recent ruling by the UK’s highest court has significantly curtailed the potential for millions of motorists to seek compensation for alleged motor finance mis-selling.
The Supreme Court opted against upholding a prior judgment that had deemed undisclosed commission payments to car dealerships unlawful.
However, the ruling preserves the possibility of compensation claims in instances where excessively large commissions were demonstrably unfair.
The Financial Conduct Authority (FCA) has stated its intention to analyze the court’s decision and determine whether a compensation scheme is warranted, with a decision expected before 08:00 BST on Monday.
Nikhil Rathi, the chief executive of the regulator, informed the BBC that any potential compensation program would be operational by the following year, should it proceed.
The BBC spoke with two individuals who initiated the Supreme Court case, as well as one person who is planning to file a claim.
Marcus Johnson, from Cwmbran, Torfaen, was among the claimants in this landmark case.
He described the outcome as “a bitter pill to swallow,” despite being awarded just over £1,650 on the basis that his relationship with the lender was unfair.
Marcus expressed that he was “pleased for myself, but not for the hundreds of others” who will now be excluded.
“It’s weird,” he stated. “It’s a win, but it’s a really big bag of salt to go with it.”
He was 27 years old when he purchased a blue Suzuki Swift in 2017 and was unaware that a commission had been paid, although the lender asserted that he had signed a relevant document.
Shortly after passing his driving test in June of that year, he visited a car dealership and, within an hour, drove away in a car he liked, feeling “very excited.”
It wasn’t until three years later, after he had paid off the car’s financing, that he realized he still owed almost the car’s cash price.
It was at that point that he decided to contact legal counsel.
Had the three claimants prevailed in their test cases, it could have subjected lenders to compensation claims totaling approximately £30 billion.
As it stands, that figure could decrease to between £5 billion and £13 billion, according to the accountancy and advisory firm BDO.
Andrew Wrench has been characterized as “a postman with a penchant for fast cars.”
He stated that the description “made me chuckle.” The 61-year-old is a former member of the armed forces and held other positions before becoming a postman, but he is proud to have been described as “the Erin Brockovich of Stoke-on-Trent.”
He expressed his satisfaction that Marcus was awarded compensation and that further claims will arise from that judgment.
“There’s still meat on the bone,” he stated, adding that he is pleased to have helped shed light on the issue, even though his own case was not successful.
“I just want people to be accountable, and I don’t want them getting away with being deceitful and dishonest,” he added. “It all comes down to: honesty is the best policy.”
Andrew’s lawyer, Kavon Hussain of Consumer Rights Solicitors, stated that the judgment was “a mixed bag” but indicated that the Supreme Court expected car dealers to “always be acting in their own interests” and that people should not anticipate receiving a favorable deal.
While the outcome has been mixed for the claimants in the case, some individuals are determined to pursue compensation.
Some dealers received larger commissions for selling loans with higher interest rates.
These arrangements were known as discretionary commission arrangements (DCAs) and were banned by regulators in 2021.
Jemma Caffrey, from Blackburn, purchased a car in 2009 after maternity leave. Her son was born with specific medical needs, and she needed a car to commute to work and attend numerous doctor appointments.
“I’m going to pursue my claim, but I do feel for the people it’s put a stop to,” she stated. “They won’t be compensated, and I find that quite sad.”
Jemma feels she was “taken advantage of as a vulnerable new mum.” She trusted the car dealership to provide her with the best possible deal and paid a high interest rate for her blue Corsa, which she named “Colin.”
It was not until years later, after reading about car finance in the local press, that she contacted a law firm to file a claim.
She now intends to pursue it.