LONDON (AP) — Britain's highest court Friday largely overturned a lower court's ruling that certain hire-purchase auto agreements were unlawful, a decision likely to bring a sigh of relief among lenders and limit the scale of compensation payments.
A Supreme Court panel of five judges sided with lenders on two of the three issues at hand, finding that they are effectively not liable for hidden commission payments to dealers.
As a result, they are expected to be spared making compensation payments to millions
of people who had taken out car finance plans that industry experts said could have cost them tens of billions of pounds (dollars).
“No reasonable onlooker would think that, by offering to find a suitable finance package to enable the customer to obtain the car, the dealer was thereby giving up, rather than continuing to pursue, its own commercial objective of securing a profitable sale of the car," the judges said in a statement.
The decision was made after the stock markets had closed to avoid any potentially disorderly trading of firms linked to the car finance market.
The decision will likely be welcomed by the financial services sector, which has been rocked over the past decade by a series of scandals, notably in relation to the improper selling of payment protection insurance, or PPI, on loans.
Last October, the Court of Appeal found that three motorists, who all bought their cars before 2021, had not been told either clearly enough or at all that the car dealers, acting as credit brokers, would receive a commission from the lenders for introducing business to them and should thereby receive compensation.
Two lenders, FirstRand Bank and Close Brothers, took the dispute to the Supreme Court, saying in a three-day hearing in April that the decision was an “egregious error.” Industry regulator, the Financial Conduct Authority, also told the U.K.’s highest court that the Court of Appeal ruling “goes too far.”
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This story has been updated to correct the number of judges on the court panel from three to five.
