The case centred on appeals brought by several customers against two financial institutions—FirstRand Ltd, operating under the MotoNovo Finance brand, and specialist property and motor lender Close Brothers Group Plc. At the heart of the matter was whether brokers adequately disclosed the commissions they received from lenders for setting up finance agreements.
The customers involved were offered car finance through brokers, who acted both as sellers of vehicles and as intermediaries arranging hire-purchase or loan agreements. However, these borrowers were unaware that the brokers were earning commissions from lenders based on the loans’ terms, creating a conflict of interest. In some instances, these commissions were calculated using a “difference in charge” (DIC) model, which incentivized brokers to secure higher interest rates to maximize their own earnings.
According to the court, the borrowers—a mix of students, workers, and first-time car buyers—placed their trust in the brokers to act in their best interests. Instead, the brokers pushed financing deals that benefited them through undisclosed commissions, sometimes amounting to a significant portion of the credit cost. In one case, a customer was charged an inflated loan rate, unaware that the broker received a payment covering nearly 70% of the total interest.
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The court also highlighted that the lenders’ small-print references to possible commissions were insufficient to alert customers to these hidden fees. It ruled that both FirstRand and Close Brothers breached their duties to consumers by not ensuring transparency in the loan agreements, setting a precedent for holding financial institutions accountable in such cases.
