Source of the Article: Kennedys

My post on LinkedIn can be seen here.

This article was originally published in Insurance Day in January 2025, written by partner Jenny Boldon and trainee solicitor William Hanwell

Will car dealers and financiers in Singapore be required to ensure fair disclosure of car finance commissions? Stay tuned..:- 

On October 25, 2024, the UK Court of Appeal ruled that lenders and car dealers breached their duty by failing to inform car buyers about commissions earned on finance loans. This decision, involving three combined appeals, could lead to widespread compensation claims and impact brokered finance practices.

Key Findings

The Court found that motor dealerships acting as credit brokers received undisclosed commissions from lenders, violating fiduciary duties. Full disclosure of commission amounts and calculations was deemed necessary for informed consent. Lenders were held accountable for dealership breaches.

Industry Impact

The ruling affects not just discretionary commission arrangements (DCAs), banned by the Financial Conduct Authority (FCA) in 2021, but most car finance deals. Up to 11 million buyers could be eligible for compensation, with estimates ranging from £13 billion to £21 billion. Some lenders have paused loans or set aside provisions.

Broader Implications

The FCA is investigating historic mis-selling practices and may introduce a consumer redress scheme. The ruling extends beyond car finance to other brokered credit agreements, such as household goods and mortgages.

Consumer Advice

Consumers are urged to:

• Review car finance agreements for undisclosed commissions.
• Watch for FCA updates on compensation schemes.
• Seek legal advice if misled.

This decision underscores the need for transparency and fair practices in brokered finance agreements.

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