Car Finance Customers May Be Eligible for Billions in Compensation

A landmark test case has opened the door for motorists who purchased vehicles using finance agreements to potentially receive billions of pounds in compensation. In 2017, Marcus Johnson, a 34-year-old resident of Cwmbran, Torfaen, acquired his initial vehicle, a Suzuki Swift. He was not made aware that the car dealership received a 25% commission, which was subsequently incorporated into the total amount he was required to repay. The Court of Appeal, in a significant ruling made in October involving Mr. Johnson and two additional claimants, determined that the finance company must reimburse Mr. Johnson for the undisclosed commission along with interest. He is now set to receive slightly more than £3,200. Trade Centre Wales and FirstRand, the parent company of MotoNovo Finance, have not provided a response to inquiries for comment. Mr. Johnson expressed that he was “furious” upon discovering the situation, stating: “I paid £1,650 for what I can only describe as showing me around the showroom for 10 minutes and then printing off a bit of paper.” He continued: “I signed a few documents and then drove away in the car.” Mr. Johnson stated that he had no alternative but to utilize finance for the car purchase, characterizing it as “heartbreaking” to learn that such a significant additional sum had been charged. He remarked: “Someone in my situation at that time, not being able to buy that kind of age car with cash, you would use finance,” adding: “And for companies to be able to be allowed to charge these ridiculous amounts of commission without disclosing it, without me being made aware of it at all, myself and thousands of other people.” The vehicle was purchased by Mr. Johnson from Trade Centre Wales for £4,600, with the dealership facilitating the finance arrangement through MotoNovo Finance, which is based in Cardiff. He was not notified that the dealership was receiving a commission of £1,650, representing approximately 25% of his total borrowed amount. Consequently, the car finance sector is currently allocating substantial funds to address potential similar claims in the future. Martin Lewis of Money Saving Expert emphasized the importance of registering claims promptly. He noted that claimants are not necessarily required to use a claims management firm, which would deduct a portion of any settlement. Mr. Lewis recommended that individuals initially ascertain whether their finance agreements contained a discretionary commission arrangement and, if so, submit a time-stamped complaint to the relevant company. This advice was reiterated by Gary Rycroft, legal expert for Rip-Off Britain, who informed BBC Radio Wales Breakfast that the legal precedent established by the Court of Appeal’s decision rendered “secret commission” illegal. He advised reviewing contracts and, if uncertain, inquiring with the car finance company about disclosure. Rycroft stated that non-disclosure strengthens a case, but arrangements “buried in the small print” could still warrant a claim. However, he cautioned that while early preparation is beneficial, there is a strong possibility that lenders will file a Supreme Court appeal, potentially delaying action on claims for an extended period. Mr. Johnson sold his Suzuki Swift in 2020. Despite making regular payments for three years, he still had an outstanding balance of £3,500, which he had presumed was attributable to the loan’s interest. He commented: “With paying off the agreement for three years, I had only scratched the surface,” At the time, dealerships were not operating beyond industry rules and regulations by accepting this type of commission; however, they were obligated to inform their clients. The Court of Appeal stated that “burying such a statement in the small print which the lender knows the borrower is highly unlikely to read will not suffice”. Regulations concerning commission have been altered since 2021, when the Financial Conduct Authority prohibited discretionary commission arrangements. Kevin Durkin of HD Law, who represented Mr. Johnson in the test case, remarked: “As a financial reward for them being chosen, FirstRand Bank paid Trade Centre Wales a commission which Marcus knew nothing about. “There was only a vague reference to this arrangement in the paperwork which the court of appeal found was buried. “As such it meant that Marcus paid more than he necessarily needed to.” He further noted that this was not an isolated incident, as numerous car dealerships and finance companies have conducted business similarly. Durkin stated: “It’s completely widespread,” continuing: “Almost all cars that are purchased on finance through a dealer or credit broker are sold in this way. “I’ve yet to see any terms and conditions in a case involving my clients where the terms and conditions reference is either absolute in terms of ‘we will receive a commission’ or alternatively is made prominent in the paperwork that is being signed.” Mr. Johnson indicated that he would refrain from using a finance agreement in the future, but expressed delight upon the Court of Appeal’s decision in his favor. He described the outcome as: “It was a big moment of relief and excitement and obviously happiness all at the same time – especially with how tough things are at the moment,” and conveyed his hope that others would also recover funds, adding: “I’m so happy that my case and the decision that was made could potentially help thousands of other families, to me that’s worth more than the money that I reclaimed in a way.” Copyright 2024 BBC. All rights reserved. The BBC is not responsible for the content of external sites. Read about our approach to external linking.