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By his own admission, Marcus Johnson’s metallic blue Suzuki Swift was an unremarkable car – a little runaround bought after passing his driving test. But how this run-of-the-mill vehicle was sold is now at the heart of a far more remarkable, multi-billion pound saga. Lenders and dealers have been accused of hiding commission payments made when cars were bought on finance deals.
A recent Court of Appeal ruling in the case of Mr Johnson, and two other car buyers, raised the possibility of millions of motorists receiving compensation. Not everyone agrees with that conclusion. As MPs prepare to quiz the boss of the financial regulator over its role, there seems to be an industry consensus that only the highest court in the land should settle this affair. That, were it to happen, could put payouts in greater doubt, or at least delay them for many months.
Mr Johnson from Cwmbran, Torfaen in south Wales was aged 27 when he was on the lookout for his first car in 2017. He had been cycling to and from his job as a factory supervisor. He and his fiancée, now wife, Kirsty, were taking buses and taxis to visit family and friends after they had moved home. Buying a car made sense. So too did going to a dealership whose advert he “heard 10 to 15 times every day” on the radio at work.
His case went to court. He says he almost missed the date after the notification went into his email junk folder. He lost. But at the higher Court of Appeal, his case was bunched with two similar ones, and the three judges found unanimously in their favour.
The judges’ decision was a win for the trio, but – more significantly – opened the door for claims from many, many more motorists. In the conclusions of a clear, 46-page judgement are three even clearer words: “fully informed consent”. They ruled it would be illegal for the lender to pay any commission to the dealer without the fully informed consent of the buyer.
Bearing in mind that something like 80% or 90% of cars are bought on finance – that is about two million vehicles a year, then the potential for many deals past and present failing that test is high. Analysts have suggested millions of buyers could each receive hundreds of pounds in compensation. Estimates of the total bill are up to £30bn.
However, banks have seen success before at the Supreme Court regarding mass compensation claims. In 2009, it found in their favour over the issue of bank overdraft charges. However, banks did have to pay out billions of pounds over the PPI (payment protection insurance) scandal.
The City regulator, the Financial Conduct Authority, has written to the Supreme Court requesting a speedy decision on motor finance, given the potential impact on the market and consumers. In the meantime, it will face questions – starting when leading figures, including chief executive Nikhil Rathi, appear before the Treasury Committee on Tuesday.
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