The Court of Appeal handed down judgment on motor finance commission on 25 October 2024, allowing all three consumer appeals in Johnson v FirstRand Bank, Wrench v FirstRand Bank and Hopcraft v Close Brothers. In the judgment, [2024] EWCA Civ 1282, the court held that car dealers who arranged finance for their customers owed them duties when acting as credit brokers, and that lenders who paid commission to those dealers could be liable where the commission was not properly disclosed.
The appeals were heard over three days in July 2024 by Lady Justice Andrews, Lord Justice Birss and Lord Justice Edis, as listed on the judiciary website. The court noted that an authoritative ruling on the issues was required.
What the court decided
The dealers sold the cars but also acted as credit brokers on behalf of the claimants, with the task of finding a suitable and competitive finance deal from their panel of lenders. The court held that they therefore owed the claimants the disinterested duty described in earlier case law, and that 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 commission.
Whether the lender is a primary wrongdoer depends on secrecy. In Hopcraft there was no disclosure and in Wrench the court found insufficient disclosure to negate secrecy, so the lenders were liable as primary wrongdoers. In Johnson, where there was partial disclosure sufficient to negate secrecy but not to secure fully informed consent, the lender was liable as an accessory to the broker's breach of fiduciary duty. Mr Johnson's separate claim that the relationship was unfair under the Consumer Credit Act 1974 also succeeded on its specific facts, although the court said non-disclosure or partial disclosure alone will not necessarily make a relationship unfair.
Why the motor finance commission ruling matters
The decision goes beyond the discretionary commission arrangements already under regulatory scrutiny, because it turns on disclosure and consent for commission of any kind. Lenders, dealer groups and broker networks face potential claims for repayment of commission and related remedies, and will need to review historical disclosure wording, customer documentation and provisions. Consumer credit businesses in other sectors that pay introducers commission will also want to consider how far the reasoning on credit brokers applies to them. Any appeal to the Supreme Court would be a significant next step for the market.
