The British Supreme Court began to examine on Tuesday a case of abusive sales on certain auto credits, likely to open the way for a huge wave of compensation, which could count in dozens of billions of pounds for British banks. The country’s highest jurisdiction has focused on three files, in which credit car buyers have paid without realizing, in addition to the price of the vehicle and the loan, a commission returned by the bank to the concessionaire, considered as a broker in the operation.
These are three cases in which “Applicants were financially not very informed consumers with relatively low income”opposed to the South African group Firsttrand Bank and the British bank Close Brothers, said the Supreme Court in a summary of the case. One of them, Marcus Johnson, had bought on credit, in July 2017, a Suzuki Swift from a dealer in Cardiff, in Wales, for a total of 6,500 pounds (nearly 7,800 euros), without realizing that the sum included a commission of more than 1,600 pounds.
The hearing will last three days, then it will take judges for several months to decide. If the Supreme Court agrees with borrowers, as the Court of Appeal previously did, its decision will be necessary for comparable files, which are legion in the country.
Hidden committee
Desmond Gourde, 56, came to testify on Tuesday his own affair before the Supreme Court. He obtained a refund, but this man with a slender silhouette came to “Support everyone who wants to recover” The money lost, he says. This supervisor in a London bus company had bought used Honda Jazz in 2018 for more than 8,000 pounds, including interest. The commission, in its case, was nearly 800 pounds. “I had no idea of the existence of a commission. I simply asked for the funding, signed the papers, but no one told me about this commission ”he insists.
Like him, millions of drivers could be affected, as long as they bought, between 2007 and 2021, a car with a credit with a “Discretionary commission”. Banks allowed car sellers to adjust the interest rate offered to customers: the higher it was, the greater the remuneration. “I guess the automotive dealer looked at you by considering how much you could pay, and fixed (the rate) according to this”explains Kavon Hussain, one of the borrowers’ lawyers.
Collective compensation
The British Financial Markets (FCA) gendarme prohibited this type of commission in 2021. The regulator, which opened an investigation, plans to order a collective compensation program, which would allow the persons concerned to obtain compensation without going through individual complaints. But he too awaits the decision of the Supreme Court before deciding. Sam Ward, a private investigator who worked on many similar files, assures that a system had been put in place. “The more extensive the network of dealerships, the more important the commissions were.”
“We have identified a network of concessionaires which received 39 million pounds of advance commissions even before having sold a single automotive funding police”he says. The consumer association which! Considers that repairs may cost the sector up to 16 billion pounds, but some analysts think that the bill would actually be much heavier: those of HSBC thus mentioned the astronomical sum of 44 billion pounds (53 billion euros).
The banks who went to the trial before the Supreme Court, contacted, did not wish to express themselves at this stage. But British banking establishments have, in recent months, put aside considerable sums in anticipation of their exhibition in this case. The Briton Close Brothers, who provisioned 165 million pounds, had assured that despite “Uncertainty” in the short term linked to this case, the group “Rest resilient”.