Latest news with #FirstRandBank
Yahoo
04-08-2025
- Automotive
- Yahoo
Drivers should be ‘very pessimistic' over car finance claims, say lawyers
Drivers should be 'very pessimistic' about getting any compensation for taking out a car loan after a landmark ruling by the Supreme Court, experts have warned. Industry analysts also said on Friday that banks will 'breathe a sigh of relief' after the Supreme Court ruled they are not liable for hidden commission payments in car finance schemes. Nevertheless, the financial watchdog has said it is still considering whether to launch a redress scheme for consumers who potentially receive compensation. Lawyers have also indicated that some consumers should still consider pursuing their claims over 'unfair' treatment. Two lenders, FirstRand Bank and Close Brothers, went to the UK's highest court to challenge a Court of Appeal ruling which found 'secret' commission payments paid by buyers to car dealers in agreements before 2021 without the motorist's fully informed consent were unlawful. The ruling last year found three motorists, who all bought their cars before 2021, should receive compensation. But in a decision on Friday, justices at the UK's highest court overturned the Court of Appeal, though some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA). Lawyers for the lenders told the Supreme Court at a three-day hearing in April the decision was an 'egregious error', while the Financial Conduct Authority intervened in the case and claimed the ruling 'goes too far'. However, the judges upheld a claim brought by one driver under the CCA that his relationship with the finance company had been 'unfair', awarding him the commission amount of £1,650.95 plus interest. Lizzy Comley, chief operating officer of consumer law firm Slater and Gordon, said the ruling still reinforces the right of many consumers to pursue claims. She said: 'This landmark ruling is positive news for the millions of people who have lost money due to the car finance mis-selling. 'The court confirmed that for years, consumers have potentially been unfairly overcharged on car finance agreements, and this ruling reinforces their right to pursue justice and recover the compensation they deserve.' However, others have said that the ruling will make it harder for most claims. Nicola Pangbourne, partner at Kennedys law firm, said: 'If I was a driver, I would be very pessimistic about getting compensation. There's now quite a few hurdles they've got to get through.' Industry experts have suggested the ruling will be broadly seen as a success for lenders, who had been preparing for significant compensation payments. Caroline Wayman, global head of financial Services at PA Consulting, said: 'Lenders will breathe a sigh of relief at the ruling, but it should still be a wake-up call for firms to scrutinise any large, undisclosed commissions in their business. 'Firms should ask themselves whether it still feels justifiable or could be considered unfair, particularly if they haven't disclosed commercial ties to the broker and it won't be enough to expect customers to have read and understood the fine print.' On Friday, a spokesperson for the Financial Conduct Authority said after the ruling that it would confirm whether it will consult on any such scheme by 8am on Monday. They said: 'We want to bring greater certainty for consumers, firms and investors as quickly as possible.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
04-08-2025
- Automotive
- Yahoo
Car loans: Why could drivers still get compensation after court ruling?
Millions of UK motorists could be eligible for payouts worth hundreds of pounds after regulators announced an industry-wide compensation scheme. It came after a landmark Supreme Court ruling over whether motor finance firms complied with rules related to commission paid by lenders to dealers selling car loans. The ruling on Friday was widely considered a victory for finance firms potentially affected, after it was judged that two key cases were did not break the law. Here the PA news agency looks at why consumers could still be able to make claims for compensation payments. What was the court case and why was it important? The UK's highest court was considering an appeal against a Court of Appeal ruling made in October last year, relating to three claimants who had each bought cars on credit. In each case, the car dealer made a profit on the sale of the car but also received a commission from the lender for introducing the business to them, which the three claimants argued they did not know about. The Court of Appeal originally found that 'secret' commission payments, as part of finance arrangements made before 2021 without the motorist's fully informed consent, were unlawful. The lenders, FirstRand Bank and Close Brothers, challenged the decision. If the case confirmed that these three cases were all still unlawful, then consumers who bought cars with similar finance deals could make claims to potentially secure compensation. What was the result? On Friday, Lords Reed, Hodge, Lloyd-Jones, Briggs and Hamblen ruled that car dealers did not have a relationship with their customers that would require them to act only in the customers' interest, and that the Court of Appeal was wrong. But they said that some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA). It upheld one of the three claims and stressed that it was still broadly considered 'unfair'. What does it mean for consumers? Consumers who are concerned that they were not told about commission and think they may have paid too much could therefore still be eligible for compensation. The Financial Conduct Authority (FCA) watchdog said not all claims will receive payouts however. The FCA had launched its own process to look at discretionary commission arrangements (DCAs) on motor finance deals in 2024 but had put this on hold until the outcome of the Supreme Court case. Some 80,000 open cases on this issue were effectively paused for the ruling. Who is eligible for compensation? The case specifically relates to people who took out car loans between 2007 and 2021. Consumer champion Martin Lewis said in a video posted to X that millions of people are still likely to be due payments. He told Sky News the consultation is 'likely to mean 40% of people who got a car finance deal between 2007 and 2021 will be due some form of redress'. How much could I receive? The FCA said it is consulting on a redress scheme which is expected to cost between £9 billion and £18 billion. This is expected to mean victims could receive up to £950 in compensation. The regulator stressed that it was 'hard to estimate precisely at this stage the total cost to industry of the scheme'. What will the compensation process be? Currently, a lot is still not known about who exactly is eligible and how it will take place. The FCA has said that those who have already complained do not need to do anything and advised that others with potential claims contact their car loan provider, rather than use a claims management company. The regulator added that its consultation will be launched by early October. If the compensation scheme goes ahead, the first payments should be made in 2026. What does that mean for car finance firms? The motor finance industry is expected to cover the costs of the compensation, including administrative costs. Over the past few years, lenders and motor finance firms have been setting aside money to cover potential compensation payments. Why has the sector reacted positively to this? On Monday, shares in lender Lloyds and Close Brothers moved firmly higher after the ruling appeared to be more favourable than expected. Lloyds told shareholders on Monday morning that further financial provisions are 'unlikely to be material' in order to cover likely redress payments. While there is still some uncertainty over the cost of redress for the industry, positive outcomes in two of the cases mean they are likely to face fewer claims than previously expected. AJ Bell investment director Russ Mould said: 'While this issue could still cause some damage, it looks unlikely to be a repeat of the PPI scandal which blighted the banking industry in the 2010s.'
The Independent
04-08-2025
- Automotive
- The Independent
Car loans: Why could drivers still get compensation after court ruling?
Millions of UK motorists could be eligible for payouts worth hundreds of pounds after regulators announced an industry-wide compensation scheme. It came after a landmark Supreme Court ruling over whether motor finance firms complied with rules related to commission paid by lenders to dealers selling car loans. The ruling on Friday was widely considered a victory for finance firms potentially affected, after it was judged that two key cases were did not break the law. Here the PA news agency looks at why consumers could still be able to make claims for compensation payments. What was the court case and why was it important? The UK's highest court was considering an appeal against a Court of Appeal ruling made in October last year, relating to three claimants who had each bought cars on credit. In each case, the car dealer made a profit on the sale of the car but also received a commission from the lender for introducing the business to them, which the three claimants argued they did not know about. The Court of Appeal originally found that 'secret' commission payments, as part of finance arrangements made before 2021 without the motorist's fully informed consent, were unlawful. The lenders, FirstRand Bank and Close Brothers, challenged the decision. If the case confirmed that these three cases were all still unlawful, then consumers who bought cars with similar finance deals could make claims to potentially secure compensation. What was the result? On Friday, Lords Reed, Hodge, Lloyd-Jones, Briggs and Hamblen ruled that car dealers did not have a relationship with their customers that would require them to act only in the customers' interest, and that the Court of Appeal was wrong. But they said that some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA). It upheld one of the three claims and stressed that it was still broadly considered 'unfair'. What does it mean for consumers? Consumers who are concerned that they were not told about commission and think they may have paid too much could therefore still be eligible for compensation. The Financial Conduct Authority (FCA) watchdog said not all claims will receive payouts however. The FCA had launched its own process to look at discretionary commission arrangements (DCAs) on motor finance deals in 2024 but had put this on hold until the outcome of the Supreme Court case. Some 80,000 open cases on this issue were effectively paused for the ruling. Who is eligible for compensation? The case specifically relates to people who took out car loans between 2007 and 2021. Consumer champion Martin Lewis said in a video posted to X that millions of people are still likely to be due payments. He told Sky News the consultation is 'likely to mean 40% of people who got a car finance deal between 2007 and 2021 will be due some form of redress'. How much could I receive? The FCA said it is consulting on a redress scheme which is expected to cost between £9 billion and £18 billion. This is expected to mean victims could receive up to £950 in compensation. The regulator stressed that it was 'hard to estimate precisely at this stage the total cost to industry of the scheme'. What will the compensation process be? Currently, a lot is still not known about who exactly is eligible and how it will take place. The FCA has said that those who have already complained do not need to do anything and advised that others with potential claims contact their car loan provider, rather than use a claims management company. The regulator added that its consultation will be launched by early October. If the compensation scheme goes ahead, the first payments should be made in 2026. What does that mean for car finance firms? The motor finance industry is expected to cover the costs of the compensation, including administrative costs. Over the past few years, lenders and motor finance firms have been setting aside money to cover potential compensation payments. Why has the sector reacted positively to this? On Monday, shares in lender Lloyds and Close Brothers moved firmly higher after the ruling appeared to be more favourable than expected. Lloyds told shareholders on Monday morning that further financial provisions are 'unlikely to be material' in order to cover likely redress payments. While there is still some uncertainty over the cost of redress for the industry, positive outcomes in two of the cases mean they are likely to face fewer claims than previously expected. AJ Bell investment director Russ Mould said: 'While this issue could still cause some damage, it looks unlikely to be a repeat of the PPI scandal which blighted the banking industry in the 2010s.'
The Independent
03-08-2025
- Automotive
- The Independent
Car finance mis-selling payout scheme could be worth billions, says FCA
A compensation scheme to pay out drivers who were mis-sold car loans could cost as much as £18 billion, the financial regulator has said. Millions of drivers were denied payouts on Friday after the Supreme Court ruled that lenders are not liable for hidden commission payments in car finance schemes. Two lenders, FirstRand Bank and Close Brothers, challenged a Court of Appeal ruling that the 'secret' commission payments paid to car dealers as part of finance arrangements made before 2021 - without the motorist's fully informed consent - were unlawful. After the Supreme Court's decision the bulk of the claims will therefore not go ahead, with only the most serious claims eligible for compensation. The £18bn figure is a significant drop from the £45bn if the Supreme Court upheld the ruling in full. 'It is clear that some firms have broken the law and our rules. It's fair for their customers to be compensated. We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal,' said Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA). The regulator said the final cost of the scheme would depend on its final design, which makes it difficult to estimate precisely. 'The FCA thinks it unlikely the cost of the scheme, including to run it, would be much lower than £9 billion,' it said in a statement. 'And it could be higher, up to £18 billion in some scenarios though the FCA doesn't believe these are the most likely. A total cost midway in the range, as forecast by some analysts, is more plausible.' Individuals are forecasted to receive less than £950 in compensation. The consultation for payouts is due to be launched by early October, with the first payments due to be made in 2026. Those who have already made complaints do not need to do anything further, the FCA added, and anyone who believes they were not told about commission and believes they may have paid too much should make a complaint now. The FCA warns that consumers do not need to use a claims management company or law firm for the claim. 'Our aim is a compensation scheme that's fair and easy to participate in, so there's no need to use a claims management company or law firm. If you do, it will cost you a significant chunk of any money you get,' Mr Rathi's statement added. 'It will take time to establish a scheme but we hope to start getting people any money they are owed next year.'
Yahoo
02-08-2025
- Automotive
- Yahoo
Martin Lewis explains how millions could still get car finance payouts after Supreme Court ruling
Millions of drivers potentially owed compensation over hidden commission payments in car finance schemes could still be able to claim – but they need to 'be patient' for a potential automatic repayment scheme, money expert Martin Lewis said. The founder of Money Saving Expert said motorists with 'secret commission payments' could potentially be reimbursed by an automatic redress scheme by the end of the year. It comes after the Supreme Court ruled that car finance lenders would only be liable for the hidden commission payments in the most 'unfair' cases. 'Nobody should be doing anything right now. You need to sit on your hands. 'People need to be patient. It is the sensible thing to do,' Mr Lewis said. 'While you may have a claim, we are potentially going to see the regulator put in an automatic redress scheme meaning you do not have to put in a claim to get your money. 'So if you were to sign up to a claim's firm on the back of this news, there is a chance you could get money paid to you, and the claim's firm could ask for 25 per cent of it even though it has done nothing.' Mr Lewis said payouts could come by the end of the year, but people should 'wait to see' exactly what the Financial Conduct Authority redress scheme would be. Two lenders, FirstRand Bank and Close Brothers, went to the UK's highest court to challenge a Court of Appeal ruling which found commission payments paid by buyers to car dealers as part of finance arrangements made before 2021 – without the motorist's fully informed consent – were unlawful. The ruling in October last year found three motorists, who all bought their cars before 2021, should receive compensation after they were not told either clearly enough or at all that the car dealers, acting as credit brokers, would receive a commission from the lenders for introducing business to them. Lawyers for the lenders told the Supreme Court at a three-day hearing in April the decision was an 'egregious error', while the Financial Conduct Authority intervened in the case and claimed the ruling 'goes too far'. The three drivers, Marcus Johnson, Andrew Wrench and Amy Hopcraft, opposed the challenge. Giving a summary of the Supreme Court's ruling on Friday, Lord Reed, one of five justices who heard the case, said: 'For the reasons set out in detail in a judgment published today, the Supreme Court allows the appeals brought by the finance companies.' He continued: 'However, we uphold Mr Johnson's claim that the relationship between him and the finance company was unfair, and we allow the appeal in his case only because the Court of Appeal made a number of mistakes in reaching its decision. Retaking the decision on a proper basis, we award him the amount of a commission plus interest.'
