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The case of Marcus Johnson, a motorist from Cwmbran in south Wales, has shone a light on the murky world of car finance. Johnson’s case saw him take on lenders and dealers for allegedly hiding commission payments when cars were bought on finance deals. A recent Court of Appeal judgment found in the favour of Johnson and two other car buyers and opens the possibility of millions of drivers being in line for compensation. Some experts have said that the eventual bill could reach up to £30bn.
Johnson’s case centred around a Suzuki Swift, which he bought as a runabout after passing his driving test. The finance was achieved via a hire-purchase agreement and an extra personal loan but unbeknown to him, the finance provider would pay the dealer a commission of £1,650 – about a third of the repayments. Johnson only became aware of the commission involved after discussion with a lawyer.
A case bought by Johnson went to court where he lost. However, it is at the higher Court of Appeal where it was joined with two similar cases, the aforementioned Andrew Wrench and student nurse Amy Hopcraft, where the three judges found in their favour unanimously. The judges’ decision opens the door for claims from many more motorists.
The key ruling means it would be illegal for the lender to pay any commission to the dealer without the fully informed consent of the buyer. Banks have set aside hundreds of millions of pounds for potential compensation, and some lenders also temporarily paused new deals, sending shockwaves through the car industry and finance sector.
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