UK Supreme Court grants permission to appeal motor finance ruling

The UK Supreme Court has granted permission to appeal in a series of landmark cases concerning motor finance commissions, a decision that has sparked optimism in the financial sector and sent the shares of British lender Close Brothers soaring by over 12%.

The appeals centre on the obligations of car dealers and third-party lenders to fully disclose commission arrangements to customers taking out car loans. The cases include Wrench v FirstRand Bank, Johnson v FirstRand Bank, and Hopcraft & Anr v Close Brothers.

The rulings at the centre of the appeals have profound implications for the UK motor finance industry. They follow a push by the Financial Conduct Authority (FCA) for greater transparency in commission disclosures, highlighting the potential for misaligned incentives that could harm consumers.

If upheld, the rulings could trigger a massive consumer redress scheme worth an estimated £30 billion, according to Moody’s analysts. Major lenders have already started setting aside funds in anticipation of potential claims. Banco Santander’s UK division and Lloyds Banking Group, for instance, have provisioned £295 million and £450 million, respectively, to address potential liabilities.

Close Brothers had halted its motor finance operations in October following the original ruling. In November, the lender indicated that projected redress claims could impact its 2025 financial performance, though it refrained from providing specific figures.

The Supreme Court’s decision to grant an expedited appeal has been welcomed across the sector. Adrian Dally, Director of Motor Finance at the Finance & Leasing Association (FLA), described the announcement as “very good news indeed,” noting that “the expedited process will give the motor finance sector the certainty it needs.”

The appeal, which is set to take place in early 2025 according to a spokesperson for the Supreme Court, will be closely watched by lenders, consumers, and regulators alike.