A major automotive finance scandal has captivated both consumers and the automotive industry well beyond the shores of the United Kingdom, where the situation is playing out.
Car buyers who financed a vehicle purchase say they were unaware the dealership’s commission had been added to their bill. BBC News cited an example of a 25 per cent commission equivalent to £1,650 (approximately CA$2,931.55). U.K. news outlets say drivers could receive large payouts as compensation, sharing in billions of pounds.
“In a landmark case with two other claimants (in addition to the one cited), the Court of Appeal ruled in October that the finance company should pay the hidden commission plus interest back to Mr. Johnson, and he is now due to receive just over £3,200 (CA$5685.44),” said the BBC News in an article published last week.
They said the Trade Centre Wales dealership that one source bought his car from, and MotoNovo finance’s parent company FirstRand, have not yet responded to requests for comment.
In another article published last week, CNBC said the court ruled it was unlawful for dealers to receive bonuses from banks offering automotive financing because they did so without the customer’s informed consent.
“I think it is fair to say that the ruling by the Court of Appeal came as a surprise to the banks as well as the FCA,” said Niklas Kammer, Equity Analyst at Morningstar, in an email to CNBC. (The FCA stands for the Financial Conduct Authority, Britain’s financial watchdog.)
“According to the banks, they followed the rules and guidelines set by the FCA, which are not aligned with the new Court of Appeal ruling,” said Kammer. He added that, if the ruling stands, “the FCA will have to change its rules on disclosures.”
The practice of banks paying commissions, or “spiffs” to car dealers for helping finance car purchases without disclosing this to consumers is not unique to the UK, and some Canadian lenders say they are closely monitoring the UK situation.
