The Supreme Court has granted lenders Close Brothers and FirstRand permission to appeal a Court of Appeal ruling over finance options arranged by car dealers. 

In Johnson v FirstRand Lady Justice Andrews, Lord Justice Birss and Lord Justice Edis allowed three appeals finding dealers, by acting as sellers as well as credit brokers, owed car-buyers a ’disinterested duty’. The judgment found ‘the relationship was also a fiduciary one. In all three cases there was a conflict of interest and no informed consent by the consumer to the receipt of the commission.’

The Financial Conduct Authority welcomed ‘the swiftness’ of the Supreme Court’s decision and said it was considering whether to formally intervene ‘to share our expertise to assist the court on the substantive appeal’.

The FCA has previously written to the Supreme Court asking that, if the Supreme Court did grant the applications to appeal, that it determine the substantive appeal ‘as soon as possible to assist in securing legal certainty for the market’. It added: ‘This is because of the potential impact of any judgment on the motor finance market and the many consumers who rely on it.

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‘We have proposed extending the time firms have to respond to motor finance complaints where a non-discretionary commission arrangement was involved. 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.’

The FCA’s decision to consult on extending the time firms have to respond to consumer complaints about motor finance where a non-discretionary commission was involved, and for consumers to refer them to the Financial Ombudsman Service followed the Court of Appeal’s judgment which was handed down in October this year.

In an announcement to the London Stock Exchange, Close Brothers Group said: ‘On 22 November 2024, Close Brothers Limited (CBL) submitted an application for permission to appeal the Court of Appeal’s judgment against CBL in respect of the “Hopcraft” motor finance commissions case.

‘CBL has, today, been informed that permission to appeal has been granted by the Supreme Court in respect of the “Hopcraft” case. Close Brothers Group plc will not be commenting further on an ongoing appeals process, and any further announcements will be made as and when appropriate.’

The case has drawn parallels with the payment protection insurance scandal which cost banks £50bn. Total costs for car finance companies could reach as much as £30bn, according to analysts.

The Supreme Court hearings have not yet been listed but are expected to be held in early 2025.

 

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