Supreme Court ruling already affecting live motor finance deals, warns iVendi chief

Friday’s Supreme Court ruling on the Johnson v FirstRand motor finance case is already impacting live lending decisions and industry practices, according to James Tew, CEO of iVendi.

While much of the focus has been on how the judgment will influence redress for historic deals, Tew said its implications must also be considered in terms of present and future lending behaviour.

“There is rightly much attention being paid to how the Johnson decision will play out through the FCA’s consultation on older lending,” he said. “However, it’s important to recognise its implications also need to be applied to what lenders and dealers are doing now.”

Tew highlighted three key areas raised by the Supreme Court that should be of immediate concern to the industry: the nature of lender-dealer relationships, the level of commission paid, and the clarity of information provided to “unsophisticated” consumers.

“Firstly, there remain grey areas around lender relationships with dealers,” he explained. “This is especially true when it comes to co-manufactured finance products, where the dealer influences the rate set and other parameters. If these products are prioritised over others, this needs to be made clear and disclosed to the consumer.”

Tew also pointed to the issue of high commissions, noting that the 55% commission involved in the Johnson case was deemed excessive under the ‘unfair relationship’ provision.

“Lenders will be reviewing their commission structures today,” he said. “While clarification will probably come from the FCA’s redress consultation in October, the industry is currently guessing what will be considered ‘excessive’.”

He cautioned against any regression in disclosure standards. “A few people have questioned over the weekend whether the Supreme Court decision opens the door to a return to avoiding commission disclosure under CONC 4.5.3. Our view is that this would be a damaging backwards step. It’s clear the right thing is to always be transparent.”

The ruling also shone a spotlight on how to ensure finance information is accessible to less financially experienced customers. Tew called on the FCA to clarify expectations in this area.

“We’ve worked hard to build safeguards for vulnerable customers into our platform, and we stand by the quality of that work,” he said. “But finance products remain complex beyond headline figures. There’s a question mark over what information a commercially unsophisticated consumer, to use the court’s phrase, really needs to see. This should be codified now – not settled through future litigation.”

While Tew acknowledged that the judgment was broadly positive for the sector in that it limited redress exposure, he warned that reputational damage from the ongoing scandal has left dealers and lenders with work to do.

“Consumer trust is no doubt very low following the negative media coverage,” he said. “There needs to be a process of rebuilding.”

He added: “Dealers and lenders clinging to opaque, captive-led models are living in the past – and may be the ones most exposed to future mass claims.”