Friday’s Supreme Court decision is positive news for dealers and lenders, despite the FCA’s subsequent announcement on a planned redress scheme, says the Vehicle Remarketing Association (VRA).
Jonathan Butler, VRA legal counsel and partner at Geldards, said there were three key takeaways for dealers and lenders from the weekend’s events.
“Firstly, we shouldn’t lose sight of the fact that this is good news for dealers and lenders. There’s probably a collective sigh of relief in the sense that the potential exposure here is well below the largest forecasts that were being made. If we’re looking at maximum payments of around £950 for claims where the Johnson-type threshold is met, that is well below the multiple thousands that claims management companies and others were bandying around.
“Secondly, dealers and lenders are now in a position where they can start to calculate their exposure. They should be tracking down all relevant paperwork dating back to the 2007 cut-off point and examining how it aligns with the fairly high bar the court set in relation to Johnson. If it clearly explained that a commission was due and they can show the level was less that 55%, they roughly know the maximum that will be payable.
“Finally, and this is a point that has been perhaps underreported, dealers need to read their old contracts with motor finance providers to check there is no form of indemnity in place that protects the lender in the event of claims of the type now envisaged. These did sometimes exist and, if enforced, may cause issues.”
He added that the FCA redress scheme could well prove problematic in terms of evidencing claims, which would inevitably impact on the format of any final scheme.
“The Johnson-type threshold is actually a value judgment that will involve answering questions such as what does a compliant contract look like in terms of commission disclosure, what consumer characteristics need to be considered and what is an excessive commission?
“These are highly fact sensitive matters and not questions that, it seems to us, could be easily answered using anything other than an arbitrary and automated process. It needs qualified people to make assessments, and, given the likely volumes of claims, that is potentially an enormous task. It’s far from clear how the FCA envisages this working in the real world.”
Philip Nothard, chair of the VRA, added: “If there is a disappointment here, it is simply that this issue looks as though it will drag on for some time yet. The impact of any claims will be much less than any predicted worst-case scenario, but the FCA announcement means remarketing still faces some instability. That is especially the case for potential valuation of dealer businesses who have a degree of exposure.
“Our hope is that the shape of the redress scheme is finalised in a sensible format as soon as possible but, given the potential complications, we are not confident payments will be made to consumers any time soon. Certainly, the FCA’s 2026 prediction looks optimistic.”