The Finance & Leasing Association (FLA) has urged the Supreme Court to review the recent Court of Appeal judgment “in the round” while calling on the Financial Conduct Authority (FCA) to address a disparity between its commission disclosure rules and the court’s findings.
The Court of Appeal ruled in favour of three consumers on 25 October, concluding that finance brokers, including car dealerships, must fully disclose both the amount and calculation of commission to consumers.
This ruling sets a stricter standard for commission disclosure than previously required by the Financial Conduct Authority (FCA), and has caused disruption as many finance firms have halted business, leaving customers unable to collect newly purchased vehicles from dealerships. Several providers have responded to the judgment, with Close Brothers and MotoNovo announcing pauses shortly after the ruling. The resulting uncertainty over which firms are still operating is intensifying confusion in the auto finance market.
In an interview with Motor Finance Online, Adrian Dally of the FLA highlighted the unusual situation that now exists, that the judgment places the FCA’s guidelines in conflict with the court’s stance. Dally noted that the FCA must address the gap between its 2021 commission disclosure rules and the Court of Appeal’s recent findings.
“We now face a situation where the Court of Appeal has set commission standards far higher than those of the FCA,” Dally remarked, adding that this decision may also affect commission disclosures in other financial products beyond motor finance.
The FCA has yet to release a detailed response, stating only that it is reviewing the judgment. Dally reiterated FLA Director General Stephen Haddrill’s earlier statement describing the decision as “very unexpected,” while adding that the FLA supports greater disclosure as it promotes consumer trust.
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By GlobalDataWhen asked why last week’s decision caught the motor finance industry off guard, Dally explained that, in similar cases in the lower courts, lenders had prevailed in commission disclosure disputes by a margin of at least 10 to 1.
The FLA is also awaiting the outcome of a Judicial Review by Barclays on an earlier decision by the Financial Ombudsman Service (FOS) concerning a consumer dispute over a separate commission arrangement.
Dally expressed hope that the Supreme Court’s review, which will also take the FOS Judicial Review into account, would be expedited. He emphasised the need for a comprehensive, “in the round” assessment of the judgment’s broader implications for both the finance industry and consumers, noting that it now conflicts with the regulator’s position.
Are motor finance brokers and lenders now providers of financial advice?
