FirstRand takes car loans fight to UK's top court

South African financial services provider FirstRand has asked the UK's Supreme Court for permission to challenge recent appeal court rulings against the London branch of its MotoNovo car financier on the basis that the judgments could have far-reaching implications for the country's entire consumer finance sector, reports Fin24. The financial services group, which owns local banking brands FNB, RMB, and car financier WesBank, said on Friday it would approach the UK's final court of appeal following two appeal court rulings that went against MotoNovo's London branch, whose lending book is caught up in a wider regulatory probe over vehicle finance commission arrangements. The two recent cases that went against MotoNovo involved appeals by two individuals named simply as ‘Messrs Wrench and Johnson’, who initially lost cases against the car financier in lower courts but then found success in the UK Court of Appeal. The cases relate to historic commission arrangements between UK lenders and car dealerships that may have resulted in vehicles being sold at higher interest rates. The matter is being probed separately by the UK's Financial Conduct Authority (FCA). FirstRand was forced to book a R3bn accounting provision in its results for the year to end-June in order to cover the potential impact of the investigation by the FCA, which is set to announce its next steps in May 2025.

FirstRand wants to appeal the judgments which effectively found that car dealerships have a fiduciary duty to their customers. FirstRand says it does not agree that motor dealers owe a fiduciary duty to customers in the same way as trustees or company directors might do, notes Fin24. ‘This judgment finds that a fiduciary duty suddenly and retrospectively now likely applies to all providers of credit at point of sale which has far-reaching and materially negative implications for the motor finance industry and broader consumer finance sectors in the UK,’ FirstRand said. ‘Given the importance of this issue, FirstRand believes these matters should now be heard by the UK Supreme Court, which only considers matters of law with wider public importance.’ The basis of FirstRand's appeal was its belief that motor dealers do not owe customers fiduciary duties or any other duty around providing advice, recommendation, or information on an impartial basis. It added that when lenders disclose possible commission payments in the terms and conditions of their finance agreements signed by the customer, it cannot be said that the commission was hidden or kept secret. This followed the UK Court of Appeal's ruling in the Wrench matter, which found that the disclosure of a commission payment in the terms and conditions of the MotoNovo London branch was still inadequate to ensure that the customer was aware of it. In the Johnson matter, the UK Court of Appeal accepted that the London branch had disclosed that a commission would be paid to the motor dealer but found that the disclosure was inadequate for the customer to give informed consent, and should have gone further and beyond regulatory requirements.