Supreme Court to expedite appeal on commission disclosure

The Supreme Court is expediting an appeal in January 2025, according to an AFC source, over the Court of Appeal case concerning commission disclosure and informed customer consent, which sparked turmoil in the auto finance market in October. The announcement that the lenders involved in the case – FirstRand and Close Brothers – have been granted permission to appeal states the hearing will happen at some point between January and April, but the exact date has yet to be scheduled.

Adrian Dally, Director of Motor Finance at the Finance & Leasing Association, said: “Permission to appeal is very good news indeed. The expedited process will give the motor finance sector the certainty it needs.”

The appeal relates to three cases: Wrench v FirstRand Bank, Johnson v FirstRand Bank, and Hopcraft & Anr v Close Brothers. All three concern the duties owed to customers by car dealers and third-party lenders in relation to car finance.

The Court of Appeal decision, handed down at the end of October, caused consternation as, for the first time, the judges ruled that intermediaries had a fiduciary duty to car buyers taking out finance. The judgment also said that lenders and intermediaries must disclose information about the existence and potentially the amount of any commission payable for such arrangements, and should evidence that customers had sufficient information before committing to finance to show they had made informed consent.

Uncertainty about how lenders and brokers should meet these requirements, which go beyond the Financial Conduct Authority (FCA) regulations in place at the time, saw some lenders temporarily suspend funding to the sector, while others raced to introduce new documentation for customers.

The FCA said it welcomed the swiftness of the Supreme Court decision, having previously written asking the Court to determine the substantive appeal as soon as possible because of the potential impact of any judgment on the motor finance market and the many consumers who rely on it.

The regulator said it was now considering whether to formally intervene in the case to share expertise to assist the Court on the substantive appeal.

The FCA has been consulting on proposal to extend the time firms have to respond to motor finance complaints where a non-discretionary commission arrangement was involved.

The regulator stated: “We will take the Court’s decision to hear the appeal into account as we decide on the outcome of our consultation. We thank everyone that responded to the consultation and will publish our policy statement by 19 December 2024.”

Edward Peck, Asset Finance Connect CEO, said: “This is an early Christmas present for the auto finance sector, and a welcome signal that regulators and lawmakers are beginning to understand the urgency of addressing the apparent conflict between long-standing regulations and the Court of Appeal’s recent judgment.”