Car finance fall-out: Millions of claims but “trouble” for some law firms

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Durkin: Delighted with decision

There are “millions” of motor finance customers in the same position as Marcus Johnson – whose claim succeeded before the Supreme Court – his solicitor has declared.

But the head of another volume claims law firm has warned that some practices could be in trouble because of the number of cases ruled out by the judgment.

The comments came amidst an avalanche of reaction to Friday’s ruling, which closed off the route to compensation for many who took out motor finance involving secret commissions by finding that the car dealer was not a fiduciary.

Mr Johnson’s claim of an unfair relationship under the Consumer Credit Act 1974 (CCA) succeeded, however, with the court setting out the factors that should be taken into account when considering other cases.

The fact that the charge for credit amounted to 55% of the value of the loan was a major factor.

Yesterday, the Financial Conduct Authority set out plans to consult on a redress scheme and urged consumers not to sign up with law firms or claims management companies.

Kevin Durkin, director of Bradford firm HD Law, said: “HD Law are delighted with the decision on behalf of Marcus. The Supreme Court have clearly identified that the best and most viable route for a consumer to pursue a motor finance miis-selling claim through the courts, is under the ‘unfair relationship’ provisions of the CCA.

“HD Law believes there will be millions of customers who are in the same position as Marcus with similar facts and are entitled to get their commission back plus interest”

Mr Durkin will be speaking in the session on ‘Motor finance claims – where next?’ at our Claims Futures conference on 22 October in Manchester, along with the solicitor for the other two claimants, and one of the barristers who appeared for the claimants.

Paul Hampson, chief executive of CEL Solicitors in Liverpool, said: “The judgment massively reduces the amount of potential claimants. Firms doing this type of work will have to do a proper job and find out all the circumstances of a deal to work out if it was unfair.

“Firms that have been blanketly signing up anyone who bought a car on finance in mass numbers could be in trouble – particularly those with hefty funding arrangements…

“A lot of firms have set up specifically to do this type of work and had been banking on a windfall next year may find themselves in difficulty.”

Robert Whitehead, chairman of Manchester firm Barings Law, described the ruling as “a major blow to consumer protection and a missed opportunity to address one of the financial sector’s most troubling practices”.

He added: “This ruling may slow things down, but it will not stop the movement toward greater transparency in the car finance industry. People deserve to know the true cost of the financial products they’re sold, and they deserve to be treated fairly.

Alex Neill, co-founder of consumer rights group Consumer Voice – whose bid to intervene at the Supreme Court was rejected – said: ‘“While it’s disappointing that the ruling has significantly narrowed the circumstances under which redress applies, it’s welcome the Supreme Court has recognised some consumers deserve compensation.

“This ruling doesn’t let the lenders off the hook. Billions of pounds are still owed to consumers who had their interest rates unfairly hiked or faced the most excessive charges.”

The ruling was welcomed from those representing defendants. Andrew Wingfield, partner in the London office of US firm Proskauer, said: “The court made it crystal clear: you can’t backdoor fiduciary duties into every customer transaction – commercial context matters. This judgment narrows the road for consumers bringing mass claims, but it’s not a get-out-of-jail card for poor disclosure.”

“This judgment restores more traditional boundaries between commerce and conscience. Not every broker is a fiduciary, and not every hidden payment is a bribe – but lenders still have a duty to be transparent.

“It’s a powerful judgment for those who believe in legal certainty. The court pulled equity back from the brink of overreach and reminded us that not every bad practice is unlawful.”

Susannah Marsh, financial services litigation partner at Moore Barlow, said: “As the threat of billions in industry-wide payouts has been lifted, the financial services sector may breathe a sigh of relief, however this doesn’t put a pin in the issue entirely.

“While the Supreme Court ruling might prevent mass litigation, there may still be litigation to come. Ultimately, we’re not out of the woods yet…

“For claims management companies, this ruling will force them to change their strategy. For example, if the prospect of success in a case is lower because of this outcome, the business model is impacted.”

Andrew Barber, financial regulatory partner at global firm Dentons, said the decision also “significantly reduced” the risk of claims in other finance arrangements where commission payments were made.

City firm Travers Smith said there were two cases scheduled for the Court of Appeal which would provide further guidance as to how the bulk of motor finance claims might be dealt with, in particular those claims involving DCAs.

Clydesdale v Financial Ombudsman Service, a test case listed for September 2025, found that inadequate disclosure of a DCA was in breach of: the FCA’s commission disclosure rules, the FCA’s principles for business, and amounted to an unfair relationship under the CCA.

Angel v Black Horse, listed for April 2026, is about whether motor finance claims could be brought en masse on omnibus claim forms; the High Court said yes, in a case brought by Barings.