Welcome to the UKGI weekly regulation update service for Aviva ABC brokers

Link(s):

FCA statement on Court of Appeal judgment in Hopcraft, Johnson and Wrench | FCA (1) Hopcraft & anr (claimants/appellants) v Close Brothers Ltd (defendant/respondent)(2) Wrench (appellant) v Firstrand Bank Limited (London Branch) (respondent) (3) Johnson (claimant/appellant) v Firstrand Bank Limited (London Branch) T/A Motonovo Finance (defendant/respondent) – Courts and Tribunals Judiciary Landmark Court of Appeal Ruling Promises £21bn Payout for Motor Finance Mis-Selling Victims Court sides with consumers in motor finance claims against Close Brothers and Firstrand

Context

The FCA has published a very brief statement to say that it has noted the Court of Appeal judgment published on 25^th October 2024, in Johnson v Firstrand Bank Ltd, Wrench v Firstrand Bank Ltd and Hopcraft v Close Brothers Ltd, and is carefully considering its decision.

Key points to note and next actions

Business and industry press is referring to this decision as a landmark ruling and a “transformative moment for consumer protection”, speculating on the impact on the motor finance industry of “exposing hidden commission arrangements”.

• An article in Business Matters magazine online states that “The judgement suggests parallels with the infamous PPI mis-selling scandal, which compelled financial institutions to pay substantial redress to affected consumers. The ruling now forces lenders to confront the fallout from PCP mis-selling, potentially facing significant claims from affected borrowers. The decision sends a clear message to the industry: covert commission deals and hidden fees will no longer be tolerated.”
• The Court of Appeal has, in essence, ruled that a broker could not lawfully receive a commission from the lender without obtaining the customer’s fully informed consent to the payment.
• The court ruled that in order for consent, the consumer would need to be told all material facts that might affect their decision, including the amount of the commission and how it was to be calculated.  The judges ruled that did not happen in any of these cases.

There is a clear link between the subject matter of this case and judgement and the practice of insurance distributors adding overriders to premium finance arrangements.  Considering the FCA’s planned market study of premium finance, there are likely to be repercussions for premium finance lenders and brokers.