The FCA launched its investigation into such practices in October last year as part of a wider government effort to address spiralling insurance costs. An update is expected to be provided in June, roughly the same time when we expect to receive the Supreme Court’s ruling on the ongoing car finance scandal.
Having started at the beginning of April, the three-day Supreme Court hearing is set to determine whether “secret” car finance commission agreements were illegal in the first instance, something that could open the door for a public redress scheme involving billions of pounds in payouts.
The FCA told the Supreme Court that brokers are not required, by law, to place the best interests of the customer above their own (a legal obligation known as fiduciary duties). In a statement, the financial watchdog said: “The sweeping approach of the Court of Appeal in – effectively – treating motor dealer brokers as owing fiduciary duties to consumers in the generality of cases goes too far.”
Financial chaos
Such a sentiment was backed up by the National Franchised Dealers Association, which warned of “financial chaos”. The trade body said that “allowing the scope of common law duties to develop in leaps and bounds, rather than incrementally, inevitably gives rise to significant uncertainty and instability”.
The FCA’s intervention has been slammed by legal firms, with the managing director of Courmacs Legal, Darren Smith, telling the Daily Mail: “The regulator should be standing up for consumers, not protecting lenders.”
Nevertheless, the FCA warned the Court to exercise “a degree of caution” when it comes to evaluating whether or not to rule in favour of the lenders. Auto Express has approached the watchdog for comment, but is yet to receive a response.
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