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Marcus Johnson Didn't Know He Would Pay Commission on His Auto Finance Deal
Motorists who bought a car using finance could share billions of pounds in compensation following a landmark test case.
When Marcus Johnson, 34, from Cwmbran, Torfaen, bought his first car – a Suzuki Swift – in 2017, he was not informed that the car dealer was receiving a 25% commission, which was on top of what he received. 'he had to repay.
In a landmark case involving two other claimants, the Court of Appeal ruled in October that the finance company must pay back the hidden commission plus interest to Mr Johnson, and he should now receive just over £3,200.
Trade Center Wales and MotoNovo Finance's parent company, FirstRand, did not respond to requests for comment.
Mr Johnson said he was 'furious' when he found out what had happened, adding: 'I paid £1,650 for what I can only describe as being shown the room exposure for 10 minutes, then print some paper.
“I signed a few documents, then drove away.”
He said he had no choice but to resort to financing when he bought the car, describing it as “heartbreaking” to discover so much extra money had been taken.
“Someone in my situation at that time, not being able to buy a car like this with cash, would resort to financing,” he added.
“And so companies can be allowed to charge these ridiculous amounts of commission without disclosing it, without me and thousands of other people knowing.”
Mr Johnson bought the car from dealership Trade Center Wales for £4,600, and the company arranged finance with Cardiff-based MotoNovo Finance.
He was not informed that the dealer was receiving a commission of £1,650, which was around 25% of the total he had borrowed.
The auto finance industry is now setting aside huge sums of money to settle similar claims in the future.
How can you claim?
It's important to register your claim as early as possible, according to Money Saving Expert's Martin Lewis.
He added that claimants did not necessarily need to go through a claims management company, which would take a cut of any payout.
Mr Lewis advised people to first consider whether their finance arrangements included a discretionary commission arrangement and, if so, to make a time-stamped complaint to the company.
This was echoed by Rip-Off Britain legal expert Gary Rycroft, who told BBC Radio Wales Breakfast that the legal precedent set by the Court of Appeal ruling meant the “secret commission” was considered illegal.
He said it was important to check your contracts and ask your car finance company if information had been disclosed if in doubt.
He added that non-disclosure made the case clearer, but that provisions “buried in the fine print” might still be worth complaining about.
But he added that while getting into position quickly was a good thing, there was a good chance lenders would appeal to the Supreme Court, so claims might not yet be able to be dealt with until a some time.
Marcus Johnson
Marcus Johnson bought a Suzuki Swift in 2017
Mr Johnson sold his Suzuki Swift in 2020, but after three years of regular payments he still owed £3,500, which he said was due to interest on the car loan.
“By paying the three-year deal, I had only scratched the surface,” he said.
Dealers were not acting against industry rules and regulations by taking this kind of commission at that time, but they had a duty to inform their customers.
The appeals court said it would not be enough to bury such a statement in fine print that the lender knows the borrower is unlikely to read.
There have been changes to the rules governing commissions since 2021, when the Financial Conduct Authority banned discretionary commission arrangements.
Kevin Durkin, of HD Law, who represented Mr Johnson in the test case, said: “As financial reward for their selection, FirstRand Bank paid Trade Center Wales a commission of which Marcus knew nothing.
“There was only a vague reference to this arrangement in the documents which the appeal court said were buried.
“As such, this meant that Marcus was paying more than he necessarily needed to.”
He added that this was far from an isolated case, with many car dealerships and financial companies having operated in this manner.
“It’s completely widespread,” he added.
“Almost all cars purchased with financing through a dealer or credit broker are sold this way.
“I have yet to see any terms and conditions in a matter involving my clients where the reference to the terms and conditions is either absolute in terms of 'we will receive a commission' or clearly highlighted in the documents being signed “
Mr Johnson said he would never use a funding deal again, but was delighted when the Court of Appeal ruled in his favour.
“It was a big moment of relief, excitement and obviously happiness at the same time – especially with how difficult things are right now,” he said.
He said he hoped others would also receive money, adding: “I'm so happy that my case and the decision that was made could potentially help thousands of other families.” To me it's worth more than the money I got back one way or another. “.
