MOTOR FINANCE LENDERS UNDER THE SPOTLIGHT?
KEY DEVELOPMENTS IN THE SECTOR

WALKER MORRIS

Motor finance lenders could be forgiven for feeling under the spotlight from the Financial Ombudsman Service, Claims Management Companies, claimant law firms and the Court. James Dipple-Johnstone, Deputy Chief Ombudsman, said at a conference that they had 9,000 motor commission complaints. There’s seemingly no sign of it slowing, so where are we at?

THE OMBUDSMAN

There are four key developments:

• Expectation letters have been issued to lenders and professional representatives.
• A blog has been published on motor commission complaints.
• Re-organisation of teams into specialist teams (including a team dealing with irresponsible lending and motor commissions) for consistency and operational efficiencies.
• Adjudicator decisions have been issued to firms generally upholding complaints where there’s is a discretionary model (based on purported breaches of CONC 4.5.2G and Principle 6).

But we’ve not seen any final decisions yet. We suspect the drive by the Ombudsman Service is to get more lenders into a similar position (an adjudicator decision and detailed submissions in response). The aim of such approach may be to reduce the risk of a successful judicial review of any final decision. But given the focus on motor commissions, we expect a final decision soon.

COUNTY COURT

The Ombudsman Service’s position can be contrasted with the Court’s position. In our experience of acting for a number of motor finance lenders, it seems lenders are generally winning around two thirds of claims which go to trial. Seemingly Courts are more likely to dismiss a claim where commission was fixed.

But even where the Court has found in a customer’s favour, we’re not aware of the Court awarding rescission. Instead, the Court will often award (at the most) the commission plus interest.

BARINGS – ‘GROUP’ CLAIMS IN BIRMINGHAM

So far, there’s no binding decisions from the Court on motor commissions. However, Barings Limited have brought claims against eight lenders for multiple claimants (one lender having nearly 2,000 claimants). Barings applied for (a) the claims to be transferred to the High Court and (b) for them to be managed together with lead or test cases.

The Court dismissed both applications so (subject to any successful
appeal) the claims remain in the County Court, will be split up and transferred to the relevant County Court hearing centres. This means those cases will now process in the normal way.

WHAT’S NEXT?

With no binding decision from the Court, any final decision from the Ombudsman Service or any public announcement from the FCA, the status quo is likely to remain for now with lenders robustly defending their positions. However, we expect there will be some developments in around six to twelve months which should clarify the position.