Britain has narrowly avoided a costly car finance compensation free-for-all after a landmark court ruling derailed chances of a payout for millions of drivers.
Claims lawyers had been bombarding consumers with adverts suggesting they may have been entitled to thousands of pounds in a scandal over hidden commission on car finance deals. The scandal had been expected to rival the mis-selling of payment protection insurance, which cost banks more than £38 billion.
It was thought that nearly 15 million drivers could be entitled to payouts worth as much as £44 billion in total — although Friday’s Supreme Court ruling means the numbers are set to be far smaller. Questions have now been raised over whether those using car finance really lost out and how many of them deserve compensation at all.
The chancellor, Rachel Reeves, had tried to intervene ahead of the ruling — arguing that a colossal compensation bill for the industry would damage the economy and consumers.
The Supreme Court ruled on three cases where consumers bought cars on finance and argued that they had been treated unfairly because they had not been told about commission involved in their deals — which ranged from £183 to £1,651. The court rejected two of the three cases, but upheld a complaint by Marcus Johnson, a factory worker from south Wales — because in his case the £1,651 commission in his loan was 55 per cent of the fee (including interest) on his loan over five years.
