What is the car finance scandal – and what could today’s ruling mean for motorists?
The UK’s Supreme Court is set to deliver a landmark ruling today that could have billion-pound consequences for banks and impact millions of motorists.
The essential question that the country’s top court has been asked to answer is this: should customers be fully informed about the commission dealers earn on their purchase?
However, the Supreme Court is only considering one of two cases running in parallel regarding the mis-selling of car finance.
Here is everything you need to know about both cases, and how the ruling this afternoon may (or may not) affect any future compensation scheme.
PA file pic
What is the Supreme Court considering?
The Supreme Court case concerns complaints related to the non-disclosure of commission. This applies to 99% of car finance cases.
When you buy a car on finance, you are effectively loaned the money, which you pay off in monthly instalments. These loans carry interest, organised by the brokers (the people who sell you the finance plan).
These brokers earn money in the form of a commission (which is a percentage of the interest payments).
Last year, the Court of Appeal ruled in favour of three motorists who were not informed that the car dealerships they agreed finance deals with were also being paid 25% commission, which was then added to their bills.
The ruling said it was unlawful for the car dealers to receive a commission from lenders without obtaining the customer’s informed consent to the payment.
However, British lender Close Brothers and South Africa’s FirstRand appealed the decision, landing it in the Supreme Court.
Pic: iStock
What does the second case involve?
The second case is being driven by the Financial Conduct Authority (FCA) and involves discretionary commission arrangements (DCAs).
Under these arrangements, brokers and dealers increased the amount of interest they earned without telling buyers and received more commission for it. This is said to have incentivised sellers to maximise interest rates.
The FCA banned this practice in 2021. However, a high number of consumers have complained they were overcharged before the ban came into force. The Financial Ombudsman Service (FOS) said in May that they were dealing with 20,000 complaints.
In January 2024, the FCA announced a review into whether motor finance customers had been overcharged because of past use of DCAs. It is using its powers to review historical motor finance commission arrangements across multiple firms – all of whom deny acting inappropriately.
The FCA also said it is looking into a “consumer redress scheme” that means firms would need to offer appropriate compensation to customers affected by the issue.
An estimated 40% of car finance deals are likely to be eligible for compensation over motor finance deals taken out between 2007 and 2021, when the DCAs were banned.
To find out how you can tell if you’ve been mis-sold car finance, read the following explainer from our reporter Megan Harwood-Baynes.
Read more from the Sky News Money blog
Pic: iStock
How does the ruling affect potential compensation?
In short, the Supreme Court ruling could impact the scale and reach that a compensation scheme is likely to have.
The FCA said in March that it will consider the court’s decision and if it concludes motor finance customers have lost out from widespread failings by firms, it is “likely [to] consult on an industry-wide redress scheme”.
This would mean affected individuals wouldn’t need to complain, but they would be paid out an amount dictated by the FCA.
However, no matter what the court decides, the FCA could go ahead with a redress scheme.
The regulator said it will confirm if it is proposing a scheme within six weeks of the Supreme Court’s decision.
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What impact could this have on lenders?
Analysts at HSBC said last year the controversy could be estimated to cost up to £44bn.
Alongside Close Brothers, firms that could be affected include Barclays, Santander and the UK’s largest motor finance provider Lloyds Banking Group – which organises loans through its Black Horse finance arm.
Lloyds has already set aside £1.2bn to be used for potential compensation.
The potential impact on the lending market and the wider economy could be so great that Chancellor Rachel Reeves is considering intervening to overrule the Supreme Court, according to The Guardian.
Treasury officials have been looking at the potential of passing new legislation alongside the Department for Business and Trade that could slash the potential compensation bill.
The Treasury said in response to the claim that it does not “comment on speculation” but hopes to see a “balanced judgment”.
A man has been remanded into custody charged with child cruelty offences after allegedly lacing sweets with sedatives.
Jon Ruben, 76, of Ruddington, Nottinghamshire, appeared at Leicester Magistrates’ Court on Saturday after youngsters fell ill at a summer camp in Stathern, Leicestershire.
He has been charged with three counts of wilfully assaulting, ill-treating, neglecting, abandoning or exposing children in a manner likely to cause them unnecessary suffering or injury to health.
The charges relate to three boys at the camp between 25-29 July.
The scene in Stathern, Leicestershire. Pic: PA
Ruben spoke only to confirm his name, age and address.
Police received a report of children feeling unwell at a camp being held at Stathern Lodge, near Melton in Leicestershire, last Sunday.
Officers said paramedics attended the scene and eight boys – aged between eight and 11 – were taken to hospital as a precaution, as was an adult. They have since been discharged.
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Police said the “owners and operators of Stathern Lodge are independent from those people who use or hire the lodge and are not connected to the incident”.
Leicestershire Police has referred itself to the Independent Office for Police Conduct, after officers initially reported the incident as having happened on Monday, only to later amend it to Sunday.
It is still unclear when officers responded and whether that is why the watchdog referral has been made.
Ruben will next appear at Leicester Crown Court on 29 August.
A bishop who interrupted a church concert in his dressing gown – and told singers to “leave his house” – has formally apologised to the choir.
Jonathan Baker was filmed standing barefoot at a microphone as he criticised performers for making a “terrible racket” at St Andrew’s Church in central London.
Addressing the City Academy Voices choir directly, the bishop of Fulham said: “I write to apologise for the distress and offence I caused in bringing the concert to a premature end.
“This should not have happened … I also apologise for remarks which were made in haste, and which have understandably caused hurt and distress.”
The bishop, in his dressing gown, gave the choir a dressing down
Mr Baker had demanded for the performance to stop because it was 10pm – and says he didn’t realise the choir had booked the church until 11pm.
In the statement obtained by Sky News, he added: “I have lived here on site at St Andrew’s for 10 years, for much of which City Academy has rehearsed and performed here.
“You have been, and continue to be, welcome – and I hope that you will be able to continue the relationship with us.
“I can give you every assurance that the events of Friday evening will not recur, and I apologise again to performers (especially those unable to perform at the end of the evening) and the audience alike.”
The choir performed their last song
The choir was performing to a 300-strong audience in Holborn when the lights were suddenly turned off, with Mr Baker declaring the concert was “over”.
A church employee then asked the crowd to leave quietly and for the musicians to step down from the stage, attracting boos from the audience.
The choir went on to perform one last song, an A cappella version of ABBA’s Dancing Queen, before bringing their show to a close.
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Jonathan Baker has apologised
One member of the audience, who was attending with his 10-year-old daughter, told Sky News he initially thought the interruption was a staged joke.
Benedict Collins had told Sky News: “This work deserves respect, not to be disparaged as a ‘terrible racket’. The people here had put their heart and soul into it.
“The bishop cut them off in midstream, preventing soloists who had worked their hardest from singing – and preventing the audience, which included people of all ages, from enjoying it to the end.”
The choir told Sky News it was “upsetting” that they were unable to finish their show as planned, but “hold no hard feelings and wish the bishop well”.
A spokesperson added: “If anyone is thinking of joining one of our choirs, the City Academy Voices rehearse on Mondays in central London. Dressing gowns optional.”
The Online Safety Act is putting free speech at risk and needs significant adjustments, Elon Musk’s social network X has warned.
New rules that came into force last week require platforms such as Facebook, YouTube, TikTok and X – as well as sites hosting pornography – to bring in measures to prove that someone using them is over the age of 18.
The Online Safety Act requires sites to protect children and to remove illegal content, but critics have said that the rules have been implemented too broadly, resulting in the censorship of legal content.
X has warned the act’s laudable intentions were “at risk of being overshadowed by the breadth of its regulatory reach”.
It said: “When lawmakers approved these measures, they made a conscientious decision to increase censorship in the name of ‘online safety’.
“It is fair to ask if UK citizens were equally aware of the trade-off being made.”
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What are the new online rules?
X claims the timetable for platforms to meet mandatory measures had been unnecessarily tight – and despite complying, sites still faced threats of enforcement and fines, “encouraging over-censorship”.
“A balanced approach is the only way to protect individual liberties, encourage innovation and safeguard children. It’s safe to say that significant changes must take place to achieve these objectives in the UK,” it said.
A UK government spokesperson said it is “demonstrably false” that the Online Safety Act compromises free speech.
“As well as legal duties to keep children safe, the very same law places clear and unequivocal duties on platforms to protect freedom of expression,” they added.
Users have complained about age checks that require personal data to be uploaded to access sites that show pornography, and 468,000 people have already signed a petition asking for the new law to be repealed.
In response to the petition, the government said it had “no plans” to reverse the Online Safety Act.
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Why do people want to repeal the Online Safety Act?
Reform UK’s leader Nigel Farage likened the new rules to “state suppression of genuine free speech” and said his party would ditch the regulations.
Technology Secretary Peter Kyle said on Tuesday that those who wanted to overturn the act were “on the side of predators” – to which Mr Farage demanded an apology, calling Mr Kyle’s comments “absolutely disgusting”.
Regulator Ofcom said on Thursday it had launched an investigation into how four companies – that collectively run 34 pornography sites – are complying with new age-check requirements.
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These companies – 8579 LLC, AVS Group Ltd, Kick Online Entertainment S.A. and Trendio Ltd – run dozens of sites, and collectively have more than nine million unique monthly UK visitors, the internet watchdog said.
The regulator said it prioritised the companies based on the risk of harm posed by the services they operated and their user numbers.
It adds to the 11 investigations already in progress into 4chan, as well as an unnamed online suicide forum, seven file-sharing services, and two adult websites.
Ofcom said it expects to make further enforcement announcements in the coming months.
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