7:55 am, October 28, 2024
Honda has told its car dealers that it will pause paying out on car finance after the landmark ruling in the Court of Appeal on Friday.
In a bulletin to its dealers this weekend – seen by Car Dealer – Honda Finance Europe operations director Richard Winter told its dealer partners of its ‘difficult decision’.
Winter said Honda would not be paying out on finance agreements currently set up ‘until further notice’.
Customers who were due to collect their vehicles over the weekend, and had financed their cars via Honda, were told they would not be able to take delivery.
Friday’s decision in the Court of Appeal ruled in favour of three customers and said ‘a broker could not lawfully receive a commission from a lender without obtaining the customer’s fully informed consent to the payment’.
This means, as it stands, car dealers cannot receive commission payments for arranging finance without customers knowing the details.
The industry is in disarray since the ruling, with Close Brothers, one of the firms named in the case, pulling lending on Friday.
Close said it disagreed with the decision and would appeal to the UK Supreme Court.
Honda’s email bulletin to dealers on Saturday said: ‘This judgement has serious implications for consumer and business to business credit. The exact impact is being assessed by the industry and ourselves.
‘However, in short, it says not only are discretionary commission arrangements unlawful but also that the law requires disclosure of commissions and that the informed consent of the customer to the commission being paid must be obtained before entering into the contract.
‘Motor finance lenders across the industry will now be considering whether they can execute (pay out) finance business before they have changed their systems in line with the judgement.
‘As a result of this judgement, Honda Finance will pause paying out business until further notice as we continue to assess the judgement and its impact. There will be no exceptions to this.’
Honda said it understood this was a ‘difficult decision’ and ‘appreciated support managing customer expectations’.
Car Dealer has contacted Honda for comment.
The Japanese car firm is unlikely to be the only manufacturer dealing with the ramifications of Friday’s shock judgement. The decision came to light late on Friday afternoon and more announcements are expected from lenders across the industry this week.
The ruling comes at an already turbulent time for the motor finance industry, as the FCA investigation into now-banned sales practices rumbles on.
The regulator recently extended the pause to the time firms have to provide a final response to customers, while it awaited the decision from the Court of Appeal.
The FCA said on Friday that it had noted the decision and will be ‘carefully considering’ what it means for its investigation.
