Motor finance: The legal battles are only just beginning

The legal troubles for banks and lenders may widen says a lawyer, following the success of the landmark ruling last month over motor finance.

Manchester-based Consumer Right Solicitors (CRS) has been issuing claims to County Courts for people who suspect they were mis-sold motor finance agreements. The firm operates these cases under a no-win, no-fee system.

Three of its cases: Hopcraft against merchant banking group Close Brothers, Wrench against South African Firstrand Bank, and Johnson against Firstrand Bank and Motonovo Finance lost their cases at regional courts in England.

The law firm took the cases to the Court of Appeal, which merged them together for a ‘test case’ and heard it back in July.

Last month, the Court of Appeal handed down a landmark ruling after it sided with the consumers. The court ruled that the lenders did not receive consent from customers about the amount of commission they charged.

Kavon Hussain, director at CRS, spoke to City AM, explaining that the firm has around 3,000 more of these claims in the court system, adding that they expect a few more thousands in the next 12 months.

The implications of the court’s ruling caused Close Brothers’ share price to plummet. Over the last month, its share price has fallen by nearly 45 per cent.

After the judgment, the bank informed its shareholders that it would appeal to the UK Supreme Court.

However, it hit a bump in the road after the Court of Appeal refused Close Brothers and Firstrand’s application for permission to appeal.

The court stated it was not practice for it to give its reasons, but in this case, it provided its clarifications. It stated that “it is of the view that there are no arguable grounds for appeal in the present case, which was the clearest possible example of payment of a secret commission to a fiduciary.”

The lenders’ only option is to apply directly to the Supreme Court, which City AM understands the bank will seek to do.

Opening up the floodgates

Hussain stated that he thinks “the Supreme Court issue is a double edged sword for us.”

“We would love to get on with ongoing litigation without having the distraction of preparing for the Supreme Court. However, the Court of Appeal decision is so emphatic that if the Supreme Court did give permission to appeal, then the likely issue would be to deal with the tension” in other rulings.

He did note that “we believe the Supreme Court could then give unequivocal guidance and end any tension, most likely in the favour of the consumer.”

Currently the legal findings on the motor finance fallout were issued by the Court of Appeal, which only has jurisdictions in England and Wales. If the case goes in front of the Supreme Court, the highest court in the UK, the door is open to more jurisdictions.

“If the Supreme Court does decide to consider an appeal, any decision would be binding in Northern Ireland and Scotland and persuasive in commonwealth countries where the Privy Council is the highest court of appeal,” Hussain explained.

The Financial Conduct Authority (FCA) said it will write to the Supreme Court asking it to “decide quickly” whether it will give permission to appeal.

This comes as the City watchdog revealed today that it was considering giving lenders more time to respond to consumer complaints after the court’s judgment. The proposals are expected to be published in two weeks, which would mean the complaint extension is in place by mid-December 2024.

The FCA’s decision wont affect those going down the legal route,explained Hussain. He added “if they delay the scheme again, then it would make the legal route more appealing.”

Close Brothers was contacted for a comment.