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3w ago

UK Supreme Court Hears Landmark Case on Undisclosed Car Finance Commissions

Close Brothers and FirstRand Bank challenge Court of Appeal ruling that brokers owe fiduciary duties to consumers, as FCA warns the decision may be overly broad.

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British banks have set aside considerable sums for potential compensation claims
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A price sticker is seen on the windscreen of a used Tesla electric car outside the showroom of a used car dealer in Manchester, Britain, October 19, 2023. REUTERS/Phil Noble/File Photo

Overview

  • The UK Supreme Court has begun a three-day hearing to review an appeal by Close Brothers and FirstRand Bank against a Court of Appeal ruling on undisclosed car finance commissions.
  • The Court of Appeal previously ruled that brokers owe fiduciary duties to consumers, requiring full disclosure of commission payments, a decision that could lead to billions in compensation claims.
  • The Financial Conduct Authority (FCA) has intervened, arguing that the Court of Appeal's interpretation of fiduciary duties is too sweeping and does not align with typical broker practices.
  • Major lenders, including Lloyds, Santander, and Barclays, have already set aside significant financial reserves in anticipation of potential liabilities stemming from the ruling.
  • The Supreme Court's decision, expected later this year, could have far-reaching implications for the car finance industry and other sectors involving broker-arranged credit.