FridayOL

A landmark Supreme Court ruling has sent shockwaves through the car finance industry, potentially impacting millions of drivers who took out loans between 2008 and 2020. The ruling centers around the legality of discretionary commission structures used by lenders, and its implications for compensation claims are significant. Parkers breaks down the complex details, explains what's still being decided, and outlines the steps you can take to check if you're eligible for a payout.

Understanding the Discretionary Commission Issue

For years, car finance companies have paid brokers a commission based, in part, on the interest rate charged to customers. This “discretionary commission” model allowed brokers to effectively set the interest rate, potentially leading them to prioritize their own earnings over securing the best possible deal for the borrower. The Supreme Court’s ruling challenges the legality of this practice, finding that it could constitute a breach of regulation.

The Supreme Court's Decision: What Happened?

The case, Plevin v Paragon Personal Finance, initially focused on a single borrower. However, the Supreme Court’s judgment has far-reaching consequences. They essentially stated that where a broker received undisclosed discretionary commission, the lender may have failed to act fairly and lawfully. This doesn't automatically mean every car finance agreement is unlawful, but it opens the door for widespread claims.

Who is Affected and How Much Compensation Could You Receive?

Millions of drivers who took out car finance agreements between 2008 and 2020 could be affected. The key factor is whether your broker received undisclosed discretionary commission. If so, you may be entitled to compensation. The amount of compensation varies depending on the amount of mis-sold commission, but it could be substantial. Estimates suggest that compensation could range from a few hundred pounds to over £10,000 in some cases.

What Needs to Happen Now?

1. Check Your Eligibility: The first step is to determine if your car finance agreement is potentially affected. Did you finance a car through a broker (e.g., a dealership)? Do you know if the broker received discretionary commission?

2. Gather Information: If you suspect mis-selling, gather any relevant documents, including your finance agreement and any correspondence with the broker or lender.

3. Contact Your Lender and/or Broker: You can contact your lender or broker directly to inquire about discretionary commission and make a claim. However, be aware that this can be a lengthy process.

4. Consider Using a Claims Management Company (CMC): Many CMCs specialize in car finance mis-selling claims. While they charge a fee (often a percentage of your compensation), they can handle the entire claims process for you. Research CMCs carefully before engaging their services.

What's Still in Play?

While the Supreme Court ruling is a significant victory for consumers, there are still some outstanding questions. The Financial Conduct Authority (FCA) is currently assessing the full impact of the ruling and is expected to issue guidance on how lenders should handle claims. Furthermore, individual lenders will need to determine the extent of their liability and how they will compensate affected customers.

Don’t Delay!

The deadline for making a claim hasn't been set yet, but it's important to act sooner rather than later. The FCA is expected to introduce a claims management window, after which claims will no longer be accepted. Don't miss out on your potential compensation – investigate your eligibility today!