Motor finance mis-selling: a billion-pound problem?

The financial services sector is watching closely to see whether the Supreme Court will uphold the Court of Appeal’s decision in the motor finance mis-selling case.

The Court of Appeal held that car dealerships that acted as a credit broker had both a disinterested duty and a fiduciary duty to their customers. Both duties were breached in instances where the car dealerships accepted commissions to encourage customers to take out loans from particular lenders that did not necessarily offer the best terms available. The Court also found that lenders and brokers had a duty to make a clear disclosure to customers if a commission has been paid to the broker for pushing customers to choose a particular finance product .

The Supreme Court is hearing the appeal in early April. Given the importance of the decision, a judgment may follow soon after this. The Supreme Court has historically taken a very strong line against similar financial practices that could be viewed as a form of bribery.

The impact of the motor finance decision will be significant as the relevant principles are likely to have wider application, potentially impacting financial institutions beyond car finance. Many banks and other lenders will no doubt be reviewing their own product offerings carefully to ensure compliance, and if the ruling is upheld, we anticipate a surge of compensation claims.

BlueCrest appeal: a game-changer for FCA enforcement?

The Court of Appeal handed down another very significant judgment clarifying that the FCA can enforce redress against an individual firm, lowering the threshold for regulatory intervention (FCA v BlueCrest Capital Management). This decision overturned the Upper Tribunal’s ruling that the FCA had to demonstrate loss, causation and breach of duty, and an actionable loss for those who were to be compensated.

We expect to see the FCA require regulated firms to make redress to customers more frequently in 2025.

FCA’s ‘name and shame’ policy: a quiet retreat?

The FCA’s plans to introduce a ‘name and shame’ policy for firms under investigation have been significantly watered down after significant opposition.

The FCA has now clarified that firms under investigation will only be named under specific and narrow circumstances, subject to a public interest test, making such instances rare. This will allay some concerns throughout the financial services sector

FCA regulation: a lighter touch

The FCA, and the PRA’s secondary objective to support the international competitiveness and growth of the UK economy, remains a key priority despite the change in government. While reducing regulatory red tape may lead to less litigation, the slow pace of financial regulatory reform means this is unlikely to impact the volume of financial services litigation in 2025.

Off-channel communications: continued cause of litigation

The crackdown on off-channel communications, particularly WhatsApp, remain highly relevant to litigation despite regulatory efforts during the pandemic.

In particular, in the event of an investigation or litigation, the proliferation of other communication channels means that emails no longer provide anything resembling a complete picture. Accordingly, off-channel communications are likely to remain a significant cause of litigation in 2025 even as they fall down the list of regulatory priorities.