DWF View On Supreme Court Decision on Hidden Commissions

This is useful comment and analysis from John Perez, Partner and Head of Finance Litigation at DWF:

“The CMC industry that has emerged in pursuing these claims on mass will likely now collapse. Any continuing claims will all be fact dependant on the nature of the individual transactions, and the courts will need to judge each of these claims on its individual merit. The judgment on the Johnson case and the issue of Unfair Relationship actually helps the lenders, as the Supreme Court set out the individual facts of that case as to why the relationship was unfair.

It also said that no disclosure of commission or partial disclosure of commission will not in itself render the relationship unfair, it will need to assess many other factors such as the amount of commission as against the total charge for credit (55% in the Johnson case and clearly far too high) as well as the representations made by the dealer to the customer which in the Johnson case were plainly false as no mention of the tie  the dealer had with the lender where the lender had the right of first refusal.

This decision will protect the future integrity of the market and will also lay the foundations based on the judgement on the Johnson case as to how the FCA will seek to impose a redress scheme, possibly by applying certain thresholds that it will set out as to why a relationship is unfair. It could seek to follow its previous approach on PPI and Plevin case by setting a threshold of 50% of the amount of commission as against the total charge for credit, which in reality will massively reduce the applicable claimants. The cases we have seen where commissions were over 50% of the Total charge for credit are minimal.”