Buyers of cars have a right to know about, and must give consent to, any commission arrangements between their finance lender and car dealer, the Court of Appeal has held
Ruling in three conjoined cases, Johnson v Firstrand Bank (London branch) t/a Motonovo Finance [2024] EWCA Civ 1282, the court found car dealers have a fiduciary duty when arranging finance, and must be upfront about any commission. It held dealers did not satisfy this duty by hiding information about commissions in small print in terms and conditions appended to the finance agreement. Consequently, the lender was liable for the repayment of the commission in all three cases.
Handing down their judgment last week, Lady Justice Andrews and Lords Justice Birss and Edis said: ‘The dealer is acting as a seller of the cars, and also as a credit broker.
‘A credit broker offers services to help people to find credit by considering the market (or a particular section of the market) and introducing them to a potential lender who can offer them a deal which is suitable for their requirements. There is no hint in the evidence in any of these cases that the consumers concerned were aware of this.’
Kavon Hussain, principal of Consumer Rights Solicitors, which acted for two of the appellants, said: ‘This Court of Appeal judgment is going to affect every lender in the market, including Lloyds Black Horse, VW Finance, BMW, Stellantis, Mercedes, and Barclays Clydesdale.
‘We already have a substantial number of clients with claims waiting to go. This decision is a huge step towards those clients being repaid these hidden commissions.’ The firm believes the figure owed to consumers could be as high as £42bn.
In 2021, the Financial Conduct Authority banned lenders from allowing car dealers to set the rates charged to customers on credit agreements.
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