A Landmark Ruling on Car Finance Commission
On 25 October 2024, the Court of Appeal delivered a significant judgment in the case of Hopcroft v Close Brothers, addressing key issues surrounding car finance commission arrangements. This case has profound implications for consumers and the motor finance industry, especially regarding transparency and fairness in the disclosure of commission payments.
Background of the Case
The case centered on whether car dealers, acting as brokers for lenders, could receive commissions without adequately informing customers. In Hopcroft v Close Brothers, the claimant argued that:
- The commission arrangement was not disclosed at the time of entering the finance agreement.
- The lack of transparency led to unfair terms and financial detriment to the consumer.
Key Findings of the Court of Appeal
The Court of Appeal ruled in favor of the claimant, establishing that:
- Disclosure Is Mandatory: Dealers must disclose commission arrangements to customers before finalizing a car finance agreement. This includes:
- The existence of a commission.
- The amount of the commission.
- How the commission is calculated.
- Informed Consent Is Essential: The court emphasised that informed consent is a legal requirement. Customers must understand the financial implications of the commission arrangement to make an informed decision.
- Failure to Disclose Is Unlawful: The court found that failing to disclose commission payments violated consumer rights and constituted an unfair practice under existing consumer protection laws.
Implications for the Motor Finance Industry
This ruling has set a precedent for greater transparency and accountability in the motor finance sector. Unless overturned by the Supreme Court, car finance providers and brokers must:
- Fully disclose commission arrangements to customers.
- Obtain informed consent before finalising finance agreements.
- Review and potentially revise their policies to comply with the Court of Appeal’s decision.
The Road Ahead
The lenders involved in this case have appealed the decision to the Supreme Court. While the appeal is pending, the Court of Appeal’s judgment remains binding. This means motor finance providers must comply with the ruling unless it is overturned.
The Financial Conduct Authority (FCA) has also extended complaint response deadlines to accommodate the potential surge in related complaints. Providers now have until after 4 December 2025 to respond to complaints about commission arrangements.
Key Takeaways
- The Hopcroft v Close Brothers ruling reinforces the importance of transparency in car finance agreements.
- Consumers should be informed of any commission payments and their impact on loan terms.
- If you’ve been affected by undisclosed commissions, take action to protect your rights.
Final Thoughts
This landmark case is a step forward for consumer protection in the motor finance industry. As the Supreme Court considers the appeal, the focus on fairness and accountability will likely shape future practices. Stay informed and proactive about your car finance agreements to ensure you receive fair treatment.