Court of Appeal decision on motor finance commissions


28th November 2024

The Court of Appeal has upheld three consumer appeals in the motor finance industry (Hopcraft, Wrench, and Johnson), significantly expanding fiduciary and disclosure obligations. This expansion risks encroaching into other sectors including general banking, financial services and insurance, and extending beyond consumer transactions into business-to-business funding. Consequently, lenders, dealers and brokers face liability for not disclosing or inadequately disclosing commissions and fees they have paid or received as part of historic and future deals being introduced to them. This may result in primary or accessory liability for those involved.

Importantly to note:

  • 1. Secret Commissions: Complete non-disclosure renders commissions “secret” leading to primary liability for lenders.
  • 2. Partial Disclosure: Partial disclosure negates ‘secrecy’ but fails to secure fully informed consent, resulting in accessory liability for lenders.
  • 3. Consumer Credit Act: In specific cases, non-disclosure or partial disclosure may create an “unfair relationship” under the CCA leading to claims and where courts may award customers a remedy for relief under such agreements.

Appeals to the Supreme Court are eagerly anticipated. The FCA is also considering a pause on complaints relating to non-discretionary commission arrangements (DCA) commission but current suggestions intimate that this pause will be limited to the DCA and non-DCA commission complaints in the motor finance industry. We watch this space.

It is recommended that lenders, dealers and brokers urgently review commission and fee disclosure practices to mitigate potential liability for future transactions. For additional guidance, please contact Natalie Coates and for more information see our article.

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