Supreme Court judgement on motor finance commissions

Published on: 01/08/2025 00:00

In the wake of the Supreme Court decision on motor finance commission arrangements, the FCA is consulting on an industry wide redress scheme.

This is a sensible approach to reduce uncertainty and reduce the impact of Claims Management Companies, which take up to 30% of consumer redress and who’s high volume, poorly supported claims are often counterproductive.

Two elements of the FCA redress framework are striking:

1. The envisaged interest rate on redress of 3% is more in line with market conditions over the relevant period than the higher rates sometimes awarded, and seems fair and sensible.
2. The requirement for firms to search for cases as far back as 2007 is inevitably going to be challenging. The chances are that many customers – and firms – will not have retained records this far back. Most motor financing runs for no more than 3, maximum 5 years. So financing commenced in 2007 would have been repaid in 2012, over 12 years ago. Even where records of contracts closed 12 years ago still exist, they may be on old, archived systems no longer easily – or economically – retrieved.

There is also a danger that this requirement punishes those firms that have retained records, which seems unfair, and creates an incentive for firms to limit record keeping.

It is eminently sensible to avoid cases going to court as excluded from the redress scheme, but it seems highly questionable whether many customers would want to make – or would have the evidence to support – claims for finance deals closed over 12 years ago.

Hopefully the consultation process will achieve a good balance of robust, fair and workable rules for the redress scheme.