Car finance ruling reshapes redress path for consumers

The Supreme Court narrowed some mis selling claims while keeping a route for others, prompting a new redress framework and a fresh push from claims firms.

Car finance ruling reshapes redress path for consumers

Last Friday the Supreme Court delivered a mixed ruling in Hopcraft v Close Brothers. It found that car dealers did not owe fiduciary duties to customers and rejected the argument that undisclosed commissions automatically amount to a bribe. But in Johnson v FirstRand Bank the court did say a 55% discretionary commission was unfair, noting documents could create a false impression that the dealer would pick the best deal from a panel. The decision stressed that many customers may not read every clause or grasp the subtlety of discretionary terms, highlighting the role of consumer sophistication in liability. The timing of the judgment, announced at 4.35pm to avoid market disorder, underscored how regulators and the market watch a ruling that could ripple through share prices and publicity around car finance.

The fallout now centers on redress. The Financial Conduct Authority outlined a redress scheme intended to compensate affected customers, with officials saying consumers should not need to rely on claims management companies or law firms. The regulator warned that using third parties could cost a large slice of any payout, and it estimated typical compensation per agreement at under £950 while projecting a total scheme cost of £9bn to £18bn. Industry voices warn the design of the scheme matters as much as the ruling itself. Some lawyers and funders say the path to justice remains open, but it will require careful navigation, especially for discretionary arrangements and automatic opt-in questions that remain unclear at this stage.

The ruling is not a clean victory for consumers or for lenders. It clarifies that courts will not automatically treat all undisclosed commissions as unfair, but it also preserves avenues for redress where evidence shows manipulation or a misrepresentation of costs. That tension matters, because it means the justice system still plays a central role in a market that many participants want to keep predictable. Regulators face the delicate task of designing a redress regime that is fair, accessible, and resistant to gaming by industry players. The financial picture adds another layer of pressure: billions may move through the system whether or not individual claims are large, and the long road to clarity could test public confidence in consumer protection. Advocates say access to qualified solicitors remains essential as disputes shift from broad liability claims to more targeted discretionary arrangements. Critics warn that the scheme could become a gatekeeper that slows down legitimate redress if it is too complex or expensive to pursue. In the end, this is less a verdict on mis selling than a test of how patiently the system can balance fairness, caution, and market stability.

Highlights

The road to fair redress is evolving. Watch how regulators design the scheme and how everyday borrowers pursue true costs in the years ahead.