Car sales in the UK have been disrupted following a landmark court ruling on car finance. The Court of Appeal ruled that dealerships must explicitly disclose any commission they earn on financing deals, a practice previously only required upon direct customer request.
This ruling has thrown the car finance industry into turmoil, with lenders like Close Brothers and Honda Financial Services temporarily halting new business to review their practices. Major manufacturers Honda and BMW also paused deliveries of vehicles bought on finance to ensure compliance with the new regulations.
The court decision follows concerns about a potential “PPI 2.0” scandal, mirroring the mis-selling of payment protection insurance that cost banks billions. In this case, concerns surround car dealerships earning higher commissions by tying borrowers to higher interest rates.
Finance experts advise consumers who purchased cars on finance before January 2021 to review their paperwork and potentially seek compensation if they suspect mis-selling.
While dealerships like Arnold Clark have updated their paperwork to comply with the ruling, the industry awaits further guidance from the Financial Conduct Authority. Some car purchases have been delayed or stalled as lenders and dealers adjust to the new requirements.
Source: Daily Mail
