Supreme Court Grants Permission for Appeal in Motor Finance Secret Commission Ruling

The Supreme Court has granted permission for two car lenders, Close Brothers Ltd and FirstRand Bank Limited (trading as MotoNovo Finance), to appeal a landmark ruling on motor finance commission payments.

The decision to grant permission to appeal could see the possibility of the lenders involved overturning a ruling by the Court of Appeal, which was made in October. The Court of Appeal’s judgment was that it’s unlawful for lenders to pay ‘secret commissions’ to brokers without the customer’s knowledge.

Initially, the Court of Appeal decision opened the door for many motor finance customers to submit a claim against their lenders. This exerted extreme amounts of pressure on the industry as they started to take measures to try to limit a fallout that has the potential to result in tens of billions of pounds in compensation being paid out. For some finance providers, the court’s decision led to numerous firms putting a stop to new car loans, suspending commission payouts and seeing the value of their shares decline.

Now that the Supreme Court has accepted the case, it has encouraged a rise in motor lenders’ share values. Close Brothers has risen by as much as 8%, while Lloyds Banking Group, which owns Black Horse, rose 4% and Barclays has seen a 1.6% increase.

The Supreme Court has yet to set a date for the hearing, but it is anticipated that it could take place by the end of Spring 2025 – possibly around April.

The relatively quick turnaround, despite previous delays taking place over the past couple of years, follows a letter from the Financial Conduct Authority (FCA). The regulator requested an expedited hearing that could put an end to uncertainty for lenders and consumers.

“We previously wrote to the Supreme Court asking it to decide quickly whether it will give permission to appeal and, if it does, to determine the substantive appeal as soon as possible,” the FCA said in a statement released on December 11.

“This is because of the potential impact of any judgment on the motor finance market and the many consumers who rely on it. We are considering whether to formally intervene in the case to share our expertise to assist the court on the substantive appeal.”

The Financing and Leasing Association, which represents car lenders including big banks such as Lloyds and Barclays, welcomed the Supreme Court’s decision to hear the case. However, it is still unclear whether all car finance claims currently listed in the county courts will be paused.

To read more about the Court of Appeal Judgment, visit Court of Appeal Ruling on Secret Commissions in Motor Finance Arrangements.

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