Craig Leigh secures a finding that a commission payable by a finance company to a car dealership when arranging finance for a consumer constituted a secret commission.

G v CA Auto Finance UK Limited

Factual Background

G entered into a Credit Agreement (“the Agreement”) with CA Auto Finance UK Limited (“CA”) in 2013. As per the Agreement G was required to pay:

• An advanced payment of £150.00
• 47 monthly instalments of £151.56
• A final instalment of £3,009.00

The APR payable under the Agreement was a stated APR of 9.6%.

The Agreement came to an end with G making a final payment on 21 April 2015, which ended the relationship between G and CFP for the purposes of sections 140A-C of the Consumer Credit Act 1974 (“the unfair relationship provisions”).

The Agreement was arranged by a car dealer who acted as a credit broker (“DB”). The salesman working for DB was the boyfriend of one of G’s friends and it was G’s evidence that in the first instance that is why she went to DB to purchase a case. It was G’s evidence that DB provided G with multiple finance offers but these were considered too expensive for her at the time giver her limited income as a student. Nevertheless, DB eventually persuaded G to purchase a vehicle which G did with funds provided under the terms of Agreement.

Unknown to G, DB was paid commission of £600.00 (“the Commission”) by CA. The Commission was payable pursuant to a discretionary commission model whereby DB had the ability to influence the interest rate charged under the Agreement. CA alleged that the Commission would have been disclosed to G by DB and, in any event, information regarding the Commission would have been included in the initial disclosure documents given to G.

The Issues

G invited the Court to determine four issues:

a) Limitation

b) Did DB owe a duty of disinterested advice or Fiduciary Duty

c) Was the Commission secret?

d)Was the relationship unfair?

Submissions for G

1. There was no evidence that CA or DB had disclosed the payment of the Commission to    G and no evidence to support the position that the decision not to disclose this commission was not done intentionally. To the contrary, CA’s position was that it had no obligation to disclose which supported the position that the comission to disclose was intentional.
2. G gave positive evidence under cross examination that she did not know of the Commission and CA had provided no evidence to undermine or discredit that evidence. G’s evidence was that she did not find out about the Commission until “years and years later” and given the FCA did not publish their report on motor finance commission until March 2019, and discretionary commission models were not banned until January 2021, G could not with reasonable diligence have found out about the Commission until at the very earliest sometime shortly after 2019
3. As a result, G could rely on section 32 of the Limitation Act 1980 in order to postpone the time period for limitation until at the earliest 2019 which meant the claim had been brought in time.
4. DB had access to a panel of lenders from which it proposed the Agreement with CA and in proposing the Agreement implicitly told G that the terms offered by CA were competitive. Further, as a result of it being DB (and not G) who had access to the panel of lenders, DB was someone with a role in the decision-making process and was therefore under a duty to be impartial and to provide disinterested advice, information, or recommendation.
5. The commission model used by CA allowed DB to influence the interest rate, and in not making G aware of this fact at the time of entering into the Agreement, there was a significant imbalance in knowledge between CA and G to the detriment of G which deprived G of the potential ability to negotiation a better rate of interest payable under the Agreement. This, in turn, rendered the relationship between G and CA unfair.
6. The court was asked to rescind the Agreement between G and CA as the car purchase and G entering into the Agreement were distinct and separate.

Submissions for CA

1. C could not demonstrate that the Commission had been deliberately concealed to rely on section 32 of the Limitation Act 1980 and limitation had expired in 2019.
2. DB was selling G the car, not the finance. They were nothing more that an introducer and did not owe any duty to be impartial or to provide disinterested advice, information, or recommendation.
3. The court should prefer CA’s witness evidence over G’s witness evidence about the disclosure of the Commission, as dealer declaration documents had been signed by G and DB.
4. The payment of the Commission did not render the relationship unfair as DB gave G access to a number of discounts and subsidies that she would not have benefited from had she purchased the vehicle in cash or by a different method.
5. G not only received the benefit of the Agreement but also benefit of the vehicle.

Judgment

The judge found that on the evidence CA and DB had failed to disclose the payment of the Commission and so it was, in fact, a secret. found that G was a credible witness and so he accepted her evidence over that of CA’s witness regarding the Commission being disclosed to G at the point of sale.  Further, the judge was content that the decision not to disclose the Commission was intentional on CA’s part, G could not with reasonable diligence have found out about the commission until the FCA changed the rules and banned discretionary commission models and so G’s claim was not statute barred by limitation.

The judge concluded that DB did owe Ga duty for to provide disinterested advice, information, or recommendation given it was DB who had access to a panel of lenders and was taking information from G to obtain an appropriate deal to allow her to purchase the vehicle.

The failure to disclose the Commission to G, including the failure to disclosure the fact that the Commission was payable pursuant to a discretionary commission model, deprived G of the position to negotiate rendering the relationship between G and CA unfair.

When considering remedy, the Judge found in favour of G and ordered rescission of the Agreement. However, due to uncertainty over how much G had paid to redeem the Agreement early in April 2015, an order was made by the Judge requiring the parties to file written submissions on the remedy, with calculations to support the sums sought.

As a result, the Judge reserved the question of costs to be dealt with following compliance with his order as to remedy.