In a landmark decision delivered by the Supreme Court, consumers who have been mis-sold financial products may now have a stronger chance of successfully claiming against lenders for not disclosing broker commission details.
The judgment in the case of Potter v Canada Square Operations Ltd has set a precedent that could impact hundreds of thousands of similar claims across the country.
The court’s decision focused on the interpretation of the Limitation Act 1980, specifically Section 32(1)(b). This section relates to instances where a lender has intentionally concealed information essential for a consumer to understand their rights, such as hidden costs or the commissions paid to brokers.
In this case, the undisclosed fact was the size of a commission on a payment protection insurance policy linked to a loan agreement.
The Supreme Court has clarified that if a lender deliberately withholds critical information about commissions, their right to dismiss a claim based on the time limit (a limitation defense) can be challenged. Lord Reed, Lord Hodge, Lord Kitchin, Lord Sales, and Lord Lloyd-Jones unanimously dismissed the lender’s appeal.
The judgment said: ‘the existence and amount of the commission were facts which were relevant to the claimant’s right of action… The defendant deliberately concealed those facts from her, as the recorder held, by consciously deciding not to disclose the commission to her. It is not suggested that she could with reasonable diligence have discovered the concealment any earlier. The requirements of section 32(1)(b) are accordingly met.’
We welcome the Supreme Court’s ruling in this case and encourage anyone who thinks they may have been mis-sold a motor finance agreement to contact the lenders or seek legal advice to determine whether they have been unfairly treated and may be entitled to compensation
Although Lord Reed said he found himself in ‘respectful disagreement with the reasoning of the Court of Appeal’, he concluded that it was correct to find Canada Square was ‘deprived of a limitation defence’.
He added: ‘It follows that the claim is not time-barred and that the defendant’s appeal should be dismissed.’
The ruling means that even if considerable time has passed, affected consumers may still pursue their claims, given that they were unaware of the concealed facts due to the lender’s decision not to inform them.
The relevance of this judgment extends beyond the confines of payment protection insurance to various consumer finance products, including motor finance and PCP compensation claims.
This ruling may now open the door for individuals who suspect they have been mis-sold motor finance due to non-disclosure of commissions to seek compensation, even if the finance agreement was taken out some years ago. Now armed with the precedent set by the Potter case, claimants can challenge lenders and demand fairness and transparency in their financial dealings.
Commenting on the Supreme Court ruling, Bott and Co solicitor Coby Benson said: “We welcome the Supreme Court’s ruling in this case and encourage anyone who thinks they may have been mis-sold a motor finance agreement to contact the lenders or seek legal advice to determine whether they have been unfairly treated and may be entitled to compensation.”
Customers can check their car finance agreements for free using Bott and Co’s mis-sold car finance claim check. Customers can get an instant answer about their legal rights. It is estimated that the average pay out could be in the region of £1,500.
The FCA uncovered widespread mis selling of finance agreements in the motor industry in a 2018 investigation. The investigation discovered that unbeknown to customers, lenders systematically incentivised brokers and car dealers to charge their customers higher interest rates so they could receive higher commissions themselves.
Following the investigation, one car dealer openly admitted, “Frankly, we were getting away with murder. We weren’t treating customers fairly and were, in effect, charging them to earn us money.”
Jonathan Davidson, director of supervision for retail and authorisations at the FCA, said the actions discovered were unacceptable.
“Some motor dealers are overcharging unsuspecting customers over £1000 in interest charges to obtain bigger commission payouts for themselves.”