Marcus Johnson's journey with his metallic blue Suzuki Swift began as an ordinary purchase after passing his driving test. Little did he know that this seemingly run-of-the-mill vehicle would become the center of a remarkable legal battle involving lenders and dealers.

Uncovering the Hidden Commission in Car Finance Deals

Marcus Johnson's Initial Car Purchase

Marcus Johnson, a 27-year-old from Cwmbran, Torfaen in south Wales, was in need of a car. He had been relying on cycling to and from his job as a factory supervisor and taking public transportation to visit family and friends. Buying a car made sense, and he was attracted to a dealership whose ad he heard frequently on the radio at work. He took the Suzuki Swift for a test drive and decided to buy it, paying a deposit. He believed it was a financially sound decision to get a newer car with fewer problems.However, what he didn't know was that the finance provider would pay the dealer a commission of £1,650, which was a significant amount considering his borrowing. He had always thought that car dealerships made their money through selling cars, not by arranging finance. Later, he discovered this hidden commission and was shocked by its magnitude. "Commission as part of the industry is not necessarily a bad thing," he said. "But it was kept out of sight. If they are deceiving customers, then, to me, that's disgusting."

The Court Case and Its Impact

Mr. Johnson's case went to court, and he almost missed the date as the notification ended up in his email junk folder. He initially lost, but at the higher Court of Appeal, his case was combined with two similar ones, and the three judges ruled in his favor. The other two car buyers involved were Andrew Wrench, a postman with a love for fast cars, and student nurse Amy Hopcraft. Mr. Wrench was shocked by the impact of the ruling, but it was the principle of fairness that motivated him. Mr. Johnson, too, was surprised that his case even reached court but emphasized his dislike of people losing out. "And lots of people who did not have the money to buy a car were ripped off," he said.The judges' decision was a significant win for the trio and opened the door for claims from many more motorists. The conclusion of a 46-page judgment clearly stated that it would be illegal for the lender to pay any commission to the dealer without the fully informed consent of the buyer. This means customers should be clearly informed about the commission and agree to it without it being buried in the loan terms. Considering that around 80% to 90% of cars are bought on finance, the potential for many past and present deals to fail this test is high. Analysts suggest millions of buyers could receive hundreds of pounds in compensation, with estimates of the total bill reaching up to £30bn. Banks have set aside hundreds of millions of pounds for potential compensation, and some have temporarily paused new deals. The case has sent shockwaves through the car and finance industries.

The Role of the FCA and the Future

Kevin Durkin from HD Law represents Mr. Johnson and believes the Court of Appeal decision is clear, and redress payments should start. Failing to do so means "justice delayed is justice denied." However, the story is not over yet. David Postings, the chief executive of UK Finance, representing lenders, has stated that the ruling is subject to different interpretations. The defendants in the case have requested the Supreme Court to review it. Banks have had success at the Supreme Court in the past regarding mass compensation claims. The City regulator, the Financial Conduct Authority, has written to the Supreme Court requesting a speedy decision due to the potential impact on the market and consumers. In the meantime, the FCA will face questions when its chief executive Nikhil Rathi appears before the Treasury Committee on Tuesday.In 2021, the FCA banned deals where the dealer received a commission based on the interest rate charged to the customer, saving drivers £165m a year. Since January, it has been considering whether to pay compensation to people with these deals before 2021. However, it did not ban commissions or fees on a wider scale or stipulate how dealers should disclose receiving payments from lenders. This has led to dissatisfaction among motorists who believe the regulator should have done more to protect them and among lenders and dealers who feel they were given the green light to continue paying commission. The FCA is planning to extend the time dealers have to deal with complaints and wants any mass compensation to be administered orderly. The nature of any such redress is currently uncertain. So, for now, disgruntled drivers are left waiting with no clear idea when they will get justice.