The UK’s Supreme Court is set to deliver a landmark ruling today that could have billion-pound consequences for banks and impact millions of motorists.
The essential question that the country’s top court has been asked to answer is this: should customers be fully informed about the commission dealers earn on their purchase?
However, the Supreme Court is only considering one of two cases running in parallel regarding the mis-selling of car finance.
Here is everything you need to know about both cases, and how the ruling this afternoon may (or may not) affect any future compensation scheme.
What is the Supreme Court considering?
The Supreme Court case concerns complaints related to the non-disclosure of commission. This applies to 99% of car finance cases.
When you buy a car on finance, you are effectively loaned the money, which you pay off in monthly instalments. These loans carry interest, organised by the brokers (the people who sell you the finance plan).
These brokers earn money in the form of a commission (which is a percentage of the interest payments).
Last year, the Court of Appeal ruled in favour of three motorists who were not informed that the car dealerships they agreed finance deals with were also being paid 25% commission, which was then added to their bills.
The ruling said it was unlawful for the car dealers to receive a commission from lenders without obtaining the customer’s informed consent to the payment.
However, British lender Close Brothers and South Africa’s FirstRand appealed the decision, landing it in the Supreme Court.
Pic: iStock
What does the second case involve?
The second case is being driven by the Financial Conduct Authority (FCA) and involves discretionary commission arrangements (DCAs).
Under these arrangements, brokers and dealers increased the amount…
