The outcome of a Supreme Court case on hidden commissions could result in refunds for vehicle owners.
Millions of people across the country who took out car finance before 2021 may be due a compensation payout of around £1,100 if the Supreme Court finds widespread failings by firms meant they lost out due to ‘hidden commission’. In April, it heard an appeal against the Court of Appeal’s judgment on the matter.
Martin Lewis and the MoneySaving Expert (MSE.com) team first highlighted how the Financial Conduct Authority (FCA) was investigating complaints over past use of motor finance Discretionary Commission Arrangements (DCAs) last year.
Taking to social media on Monday, the consumer champion said there’s been no update on the outcome, but a decision on the case is likely to be in July.
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Posting on X, formerly Twitter, the financial guru said: “What’s happening with car finance reclaiming? I’m being asked this a lot. No update I’m afraid, the Supreme Court case has been heard and everything is now waiting for its decision. There is no way to know when that’ll happen but many I speak to have a working assumption it’ll be July.”
Martin has previously estimated that compensation of around £1,100 could be due on around 40 per cent of all car finance deals made between April 2007 and January 28, 2021.
That means anyone who took out finance with the ‘hidden DCA charge’ to purchase a van, campervan or motorcycle during that period, may be entitled to a refund.
The FCA is not planning to make any further announcements until after the Supreme Court has announced its decision.
However, in March the FCA said it would consult on an “industry-wide redress scheme” within six weeks after the Supreme Court announces its decision.
At the time, the FCA said: “We are currently reviewing the past use of motor finance Discretionary Commission Arrangements (DCAs). We’re seeking to understand if firms failed to comply with requirements relating to DCAs and if consumers lost out as a result. If they have, we want to make sure consumers are appropriately compensated in an orderly, consistent and efficient way.”
The FCA said that when it launched its review last year, a ruling by the Court of Appeal has “raised the possibility of widespread liability among motor finance firms wherever commissions were not properly disclosed to customers”.
The regulator continued: “The Supreme Court will hear an appeal against the Court of Appeal’s judgment on 1 to 3 April. We have been granted permission to intervene in the case and have filed our submission with the Court.
“We want to provide as much certainty as possible to firms, consumers and stakeholders. So, we are confirming that if, taking into account the Supreme Court’s decision, we conclude motor finance customers have lost out from widespread failings by firms, then it’s likely we will consult on an industry-wide redress scheme.
“We previously said it is more likely than when we started our review that we will introduce an alternative way of dealing with complaints.”
The FCA said that under a redress scheme, firms would be responsible for determining whether customers have lost out due to the firm’s failings. If they have, firms would need to offer appropriate compensation – the regulator would set rules firms must follow and put checks in place to make sure they do.
The FCA explained: “A redress scheme would be simpler for consumers than bringing a complaint. We would expect fewer consumers to rely on a claims management company, meaning they would keep all of any compensation they receive. It would also be more orderly and efficient for firms than a complaint led approach, contributing to a well-functioning market in the future.”
