In 2017, Marcus Johnson, a factory supervisor from Wales, purchased a car for £6,600 from Trade Centre. He later discovered he had unknowingly paid a hidden commission of £1,650 (25%). In 2022, after clicking on a Facebook advertisement, Marcus sought legal representation for a misselling claim through Kevin Durkin at HD Law.
Although Marcus initially lost at the county court level, his case was consolidated with two similar appeals to address key legal principles and set a precedent. This consolidated case resulted in a landmark victory. However, it will likely now be reviewed by the Supreme Court of Appeal.
At Voyc, we hope this ruling is overturned, as it disregards the broker’s role and risks significant disruption to the car finance industry and beyond.
Below are the top three takeaways that the Supreme Court will need to address:
1. Brokers Now Have a Fiduciary Duty to Clients
The court ruled that brokers owe a fiduciary duty (duty of loyalty) and a disinterested duty (duty to act impartially) to consumers. This means brokers must act in the best interests of their clients, particularly vulnerable consumers—a group broadly defined by the court as “everyone who does not pay with cash.”
This ruling mirrors the fiduciary duties I, as a company director, owe to our shareholders. It’s a significant precedent, as these common law principles had not previously been applied in the broker-lender relationship.
Furthermore, the court invoked statutory law under the Consumer Credit Act 1974 (CCA), particularly Section 140A. This section outlines the framework for defining unfair relationships and providing remediation, which was central to this case.
2. Commission Amounts Must Be Fully Disclosed
The court held that brokers must disclose not only the existence of a commission but also its amount and calculation method. This ensures consumers can provide informed consent. The ruling extends beyond the FCA’s 2021 ban on DCA arrangements, which only requires brokers to disclose the commission’s presence, by emphasising full transparency on the actual amount, how it is calculated and getting customers to agree to it.
Additionally, the court ruled that merely reading the terms and conditions is insufficient to assume that a “financially unsophisticated” consumer fully understands the terms. This represents a key challenge for the car finance industry, as financial processes are heavily regulated and must adhere to high standards of consumer understanding.
3. Lenders Are Accountable for Non-Disclosure
In a groundbreaking move, the court held lenders primarily liable for non-disclosure rather than brokers. In the Close Brothers case, the court found that the T&Cs made no mention of the commission. This omission was deemed fraudulent concealment—equated to bribery—due to the complete secrecy surrounding the commission, which wasn’t disclosed even during the court proceedings.
At Voyc, we believe Marcus Johnson was overcharged and misled about having access to “a panel of lenders” when MotoNovo had first right of refusal on all deals. We hope the Supreme Court overturns this ruling, as it downplays the broker’s role and could disrupt the car finance sector. That said, we anticipate that disclosure requirements will remain intact post-appeal. Lenders must enhance broker oversight to mitigate accessory liability and ensure full commission disclosure with informed consent.
How Voyc Can Help
Voyc can support businesses in improving commission disclosure. For further guidance, we’ve partnered with The Compliance Guys Ltd and Product Partnerships, experts in this field. If you need advice, please reach out to myself or Nick McDonald at TCG and Phillip Garlick at PPL.
Join the 80+ finance firms already benefiting from 100% call monitoring, real-time insights, and seamless compliance with Voyc. Contact us today for a free demo and discover how we can help optimise your operations.
