Court sides with Consumers in Motor Finance Claims
Landmark Ruling at the Court of Appeal
In a landmark decision, the Court of Appeal has sided with consumers in the motor finance test case against major banks and lenders, including Close Brothers.
The judges ruled that brokers cannot lawfully take commission from lenders unless customers give fully informed consent. To grant valid consent, consumers must know all material details—such as the amount of commission and how it is calculated. The court found that lenders failed to provide this information in any of the cases.
The Three Cases Under Review
The appeal combined three separate claims:
- Hopcraft v. Close Brothers – initially dismissed by Kingston-upon-Hull Combined Court.
- Wrench v. Firstrand Bank (South Africa).
- Johnson v. Firstrand Bank and Motonovo Finance.
Regional courts across England first handled these cases. In March, the Court of Appeal approved the challenges, and the combined trial took place in July. Today, the judges confirmed they had unanimously allowed all three appeals.
Reaction to the Decision
Close Brothers quickly responded to the ruling. The bank told shareholders it disagrees with the extension of existing case law and plans to appeal to the UK Supreme Court.
The group also stated that the Hopcraft case alone would not have a material financial impact. However, if the Supreme Court upholds this ruling, it could create a precedent for thousands of similar claims. Depending on the details of those claims, the outcome could expose the group to significant liabilities.
Close Brothers admitted it cannot yet estimate the timing, scope, or scale of the potential financial impact. Following the announcement, its shares fell by nearly 25 percent on Friday.
October 25, 2024