Today's Court of Appeal judgement on three motor finance cases seems to have created considerable concern, and some possible confusion.
It seems worth separating out the three issues with historical motor finance agreements:
🔷 The use of Discretionary Commission Arrangements (DCAs), which is the subject of the FCA's ongoing work on the market, as well as the Barclays judicial review. Today's judgement does not appear to change this issue. As I have covered previously, the use of DCAs doesn't automatically mean there was an unfair customer outcome, so the extent of any interventions by the FCA may well be limited to a minority of relevant agreements.
🔷 The failure of dealers or brokers to make a commission disclosure in line with FCA rules that existed at the time (CONC 4.5.3). It's not entirely clear for two of the three cases, but this may have been a factor in today's judgement. There's a lot of information about commission disclosures by lenders, but under the FCA rules it's the broker or dealer who should be making the disclosure. It has been absolutely standard for many years for dealer's websites and other communications to include a suitably prominent commission disclosure, so this doesn't seem likely to be a widespread issue.
🔷 An 'inadequacy' of commission disclosures because either they didn't disclose the actual amount of commission (not an FCA requirement), or because they said the commission 'may' rather than 'would' be paid, or because it can't be proven that the customer had actually read the disclosures. Such 'inadequacies' are the focus of today's ruling. This is something for the courts rather than the FCA and it probably still has a long way to run. Beyond the appeals on today's judgement, it is likely to need the collective action filed at the Competition Appeals Tribunal to proceed before anyone can really know where they stand, as that should involve a much wider look at how the motor finance market works.
Today's judgement is just one more step on a long journey to removing the regulatory and legal uncertainties that are weighing down the motor finance market, resulting in reduced availability of the best value used car loans.
Comments