JOHANNESBURG (Reuters) – South African lender FirstRand will appeal to the UK’s Supreme Court a London court ruling that motor finance brokers must fully inform customers about commissions when taking out car loans, it said on Friday as shares slipped 2%.
The Court of Appeal said in a summary of its ruling that brokers owe a fiduciary duty to consumers, which imposes “an obligation on the part of the broker to act in the best interests of the customer and not to put themselves in a position of conflict”.
FirstRand said in a statement that this “has far-reaching and materially negative implications for the motor finance industry and broader consumer finance sectors in the UK.”
FirstRand operates in the UK via its Aldermore specialist lender and savings bank. Its UK vehicle finance business is MotoNovo, part of the Aldermore Group.
The lender’s appeal to the Supreme Court is on the grounds that motor dealers do not owe customers fiduciary duties or any other duty around providing advice, recommendation, or information on an impartial basis, it said.
“When lenders make disclosures regarding the possibility of payment of commission in the terms and conditions of their finance agreements signed by the customer, it cannot be said that the commission has been hidden or kept secret,” the lender added.
At 1357 GMT, FirstRand’s shares were down 2.01%.
FirstRand said in September it had set aside some 3 billion rand ($170 million) to cover the potential cost of the Financial Conduct Authority’s probe, as it considers a potential billion pound-plus consumer redress scheme following customer complaints about overcharging on commission when buying a car.
FirstRand continues to believe that its historical practices were compliant with the law and regulations in place at the time, it said.
($1 = 17.6570 rand)
(Reporting by Nqobile Dludla)
