Britain’s motor finance industry is in disarray as companies take emergency measures to try to limit the fallout from a landmark ruling that could result in tens of billions of pounds of compensation and other legal costs. At the end of last month, the Court of Appeal ruled it was unlawful for car dealers to receive commissions from motor finance providers, unless the payments had been properly disclosed to the customer and consent had been given.
In cases involving now banned “discretionary commission arrangements” — where the interest rates customers paid were linked to the fees earned by the dealers — Patton estimated the average claim value would be between £1,200 and £1,500. On fixed fee commissions, the figure would be lower but still about £400 on average. “Think about how many people have bought a car through finance,” he said, adding that many people could be eligible for compensation on multiple purchases.