A landmark Supreme Court ruling is sending ripples through the car finance industry, potentially impacting millions of drivers who took out loans between April 2008 and January 2021. The case, revolving around undisclosed commission structures, could open the door to significant compensation payouts. Parkers breaks down the complexities of the ruling, explains what's still undecided, and provides a clear guide on what steps you should take if you believe you've been affected.

Understanding the Ruling: The Core Issue

The Supreme Court’s decision centres on whether car finance agreements involving discretionary commission payments to dealerships were mis-sold. Discretionary commissions are bonuses paid to dealerships based on selling specific finance products, such as PPI (Payment Protection Insurance) or extended warranties. The key question was whether these commissions should have been factored into the interest rate charged to customers.

The ruling confirmed that, in many cases, these commissions should have been disclosed to customers. When they weren’t, it raises the possibility that the Annual Percentage Rate (APR) – the total cost of credit – was artificially low, misleading consumers into believing they were getting a better deal than they actually were.

Who is Affected?

Millions of drivers who took out car finance agreements between April 2008 and January 2021 are potentially affected. This is a crucial timeframe – the legislation changed in January 2021, making it illegal to fail to disclose these commissions. If you financed a car during this period and didn’t receive clear and transparent information about the dealership’s commission, you may have a valid claim.

What’s Still in Play?

While the Supreme Court has established the principle of mis-selling, the final amount of compensation each individual is entitled to is still to be determined. This will be decided by the Financial Conduct Authority (FCA) through a series of test cases. The FCA is currently assessing how to calculate redress, considering factors like:

• The difference between the interest paid with the undisclosed commission and what would have been paid had the commission been factored in.
• Whether the customer would have entered into the agreement at all if they had known the true cost of credit.

What Should You Do Now?

Here's a step-by-step guide for those who believe they may have a claim:

1. Check Your Finance Agreement: Look for any mention of discretionary commissions. If there's no clear disclosure, it's a potential red flag.
2. Contact Your Finance Provider: Most major lenders have set up dedicated teams to handle car finance commission claims. Start by contacting them directly.
3. Gather Your Documentation: Collect all relevant documents, including your finance agreement, any correspondence with the lender, and proof of purchase.
4. Be Aware of Claims Management Companies: You can pursue a claim yourself without using a claims management company. However, be cautious if approached by one – ensure they are reputable and transparent about their fees.
5. Stay Informed: Keep an eye on updates from the FCA and news outlets like Parkers as the situation develops.

The Road Ahead

The Supreme Court ruling represents a significant victory for consumers. While the process of receiving compensation may take time, the potential for millions to reclaim money lost due to mis-selling is substantial. Understanding your rights and taking proactive steps is crucial to maximizing your chances of a successful claim.