The hugely anticipated hearings of Hopcraft and another (Respondents) v Close Brothers Limited (Appellant), Johnson (Respondent) v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (Appellant), and Wrench (Respondent) v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (Appellant) UKSC/2024/0157, UKSC/2024/0158, UKSC/2024/0159 get underway at The Supreme Court in April 2025. 

The three linked appeals relate to car finance, in which two lenders, Close Brothers and FirstRand Bank (MotoNovo), are challenging the Court of Appeal’s decision that a “car finance broker could not lawfully receive a lender's commission without first obtaining the customer’s full informed consent to the deal”. 

The claimants are described as “financially unsophisticated consumers on relatively low incomes who, prior to January 2021, engaged car dealers as their credit brokers to arrange hire-purchase agreements (and in one case, an additional personal loan) with lenders on their behalf, to enable them to acquire a second-hand car for less than £10,000. On each relevant occasion, only one offer of finance was presented to, and accepted by, the claimant”.

In each case, the broker made both profit on the car sale and received commission from the lender providing the finance; in some of the cases the commission was kept secret from the consumer. Brokers in an effort to maximise their commission were therefore incentivised to push consumers towards higher interest rates. The Financial Conduct Authority banned these types of agreements in 2021. 

The consumers all brought claims, with initial varying success, before a District Judge against the lenders, contending that the brokers owed a duty to “provide information, advice or recommendation on a ‘disinterested’ basis”, and seeking, among other things, the return of the commission that they had paid. However, The Court of Appeal, in a joint judgment, allowed all three of the claimants’ appeals. The lenders now appeal to the Supreme Court.

In February, the government attempted an intervention, on the basis that compensation payments would force parts of the car market out of business, and the market would become less competitive. The Supreme Court rejected this intervention.

John Hyde, writing in the Law Society Gazette says “Commentators say the ruling could pave the way for compensation claims worth up to £30bn in total, with hundreds of thousands of car buyers poised to claim back commission fees”. Lenders have set aside hundreds of millions for possible claims, and The Financial Conduct Authority has indicated that if The Supreme Court finds in favour of the consumer, it will establish its own scheme for compensating motor finance customers. 

The hearings are scheduled to run until 3 April 2025 with judgment hand-down expected after a minimum of three months. Watch this space in the Summer.