Supreme Court to rule on hidden car finance commission mis-selling this week – Martin Lewis' reaction

News. CAR FINANCE SUPREME COURT RULING TO COME 4.35PM FRI 1 AUG. This decision could have ramifications across the economy, far beyond car finance. I suspect that's why the Supreme Court has announced it's working on it till the last possible minute to get this out before its 'term closes' (that and doing it once markets close).

So I want to speedily to bash out a rough explanation of what's happening.

There are TWO types of car finance mis-selling cases and while the Supreme Court is only looking at one, both are on hold until the judgment is handed down.

1. Discretionary commission arrangements (DCAs). This applies to about 40% of car finance deals, and is where brokers and dealers could increase the amount of interest they charged customers (without telling them) on Personal Contract Purchase (PCP) and hire purchase agreements up to 2021. If they did so, they got increased commission. This was obviously problematic.

• This is NOT the case the court is deciding.

• If you've heard me talking about Car Finance reclaiming, this is the type I've focused on (my site has had over 3 million reclaim template emails sent).

• For the bulk numbers this isn't primarily about court action, but the regulator – the Financial Conduct Authority (FCA) – looking at redress for mis-selling, it has even said it may potentially do it without people needing to reclaim; it may order firms to do automatic paybacks. The FCA says it will announce its next steps six weeks after the Court ruling.

• So overall, on balance this is still likely to go ahead regardless of the Supreme Court ruling (unless it throws out an absolute wobbler – nothing is impossible!).

2. Commission disclosure complaints. This is the one the Supreme Court is deciding on.

Last year, the Court of Appeal shocked many people, the regulator, the lending industry, politicians (and me) by ruling that if car finance agreements didn't tell consumers all details of commission, including the amount (they rarely did), they were unlawful. This applies to up to 99% of car finance (so all those with DCA cases as well).

If the Supreme Court doesn't overturn the Court of Appeal decision, the knock-on effects could be substantial on other forms of lending and the economy. It could shake the foundations of consumer lending (meaning less possible available credit for many).

So much so, I have long said I worry it may do more harm than good for consumers. It's therefore unsurprising there's talk of the Chancellor overruling the decision if the Supreme Court follows the Court of Appeal [such as in this article in The Guardian].

So in summary, three things could happen...

1. Supreme Court upholds Court of Appeal ruling. This shakes everything up in the air and there may be political intervention. If not, then most people who've had car finance may be due payouts, but we don't know how big. It could see other similar cases come forward too.
   

2. Supreme Court rejects Court of Appeal ruling. In which case it's still likely DCA claims will go ahead via the regulator, but Commission Agreement claims will stop.
   

3. Supreme Court comes up with something novel...

As for what to do now... wait until the result.