Just as Lord Justice Reed was about to read out loud the Supreme Court’s decision on the motor finance case, he hit out at claim management companies (CMC) for jumping ahead of the gun.
From radio to social media posts, numerous ads have been circulating, seeking individuals who have purchased a car using motor finance, informing them that they may be liable for compensation.
The Court of Appeal shocked the market last October when it issued a ruling that found that two lenders, Close Brothers and FirstRand Bank, had not obtained the consumers’ consent for the commission.
However, despite the decision being against these two lenders, the implications had the market on edge, as a potential compensation was tipped to be worth £30bn.
The Court of Appeal ruling was on ice as the case was sent to the Supreme Court.
Commenting on Friday, Lord Reed explained: “In the period since the Court of Appeals decision, claims management firms have encouraged anyone who bought a car on higher purchase or with a PCP to sign up with them, and no doubt a great many people have done so under the impression that they had a valid claim.”
“But it was too early to form any view as to whether a valid claim lay on the basis of the Court of Appeals’ decision, as that decision was under appeal, and it was only once [the Supreme] Court decided the appeal that it would become clear whether the Court of Appeal had decided the cases correctly or not,” he added.
The Supreme Court went on to allow two appeals in favour of the lenders and one appeal in favour of a consumer (Johnson).
Last Thursday, ahead of the ruling, the legal watchdog and the Financial Conduct Authority teamed up to issue warnings to law firms and CMCs over ‘poor practices’ in motor finance claims.
The bodies warned that where there is a case, they will team up to “investigate and take action” against the firms in question.
Speaking to City AM, former Conservative MP Anthony Coombs said: “They have finally sussed these ghastly CMCs…it is just disgraceful how they’ve been doing it in a very misleading way”.
While commenting on the ruling, Martin Lewis, chair and founder of Money Saving Expert, warned his audience that, for those affected, they don’t need to sign up with a claims firm to complain. He stated that “using a CMC or law firm may end up costing them up to 30 per cent in fees of any compensation they receive.”
The Financial Conduct Authority confirmed on Sunday that it will consult on an industry-wide redress scheme following the high-profile legal ruling. The City watchdog said it will aim to publish a consultation by early October, with total costs of the redress expected to be between £9bn and £18bn.