Beyond The Verdict: The Investment Case for Litigation Funding Lives On

The Supreme Court’s Recent Ruling on PCP Mis‑Selling

In a much‑anticipated decision, the UK Supreme Court has largely overturned the October 2024 Court of Appeal ruling that deemed most car finance agreements with undisclosed commissions unlawful. Specifically:

• Commission‑Disclosure Claims: which involved lenders failing to fully inform consumers about dealer/broker commissions have been mostly thrown out by the Supreme Court.
  
  
• Discretionary Commission Arrangements (DCAs): where dealers increased interest rates to boost their commissions remain subject to regulatory scrutiny and are still actionable under FCA-led procedures.
  
  
• In response, the Financial Conduct Authority (FCA) is launching a redress scheme by autumn 2025, with compensation payouts expected to begin in 2026 and potentially amounting to £9–£18 billion.
  
  

This verdict brought relief to the financial industry, driving a surge in bank stocks like Lloyds and Close Brothers.

Why Litigation Funding Is Still a Good Bet:

Despite this setback, investing in litigation funding remains a promising avenue, and here's why:

1. Multiple Legal Pathways Still Open

While commission-disclosure claims have largely been dismissed, DCA-related cases remain viable, and the upcoming FCA-led redress scheme will likely drive significant volumes of claims - offering ample opportunities for litigation funders to back meritorious cases.

2. Regulatory Relief Looming Over DBA Ruling

The 2023 PACCAR ruling classified many third-party funding agreements as unenforceable Damages-Based Agreements (DBAs), which spooked the litigation finance industry. However, the Civil Justice Council has proposed a comprehensive reform to reverse that ruling, aiming to restore certainty and support funding market stability.

3. Robust Demand and Market Resilience

The appetite for litigation finance isn’t going away. Litigation becomes especially compelling when access to justice is driven by regulatory momentum or systemic mis‑selling - precisely what's happening in the car finance and broader consumer-protection space.

4. Adaptation Fuels Opportunity

Instead of halting, the litigation funding industry is pivoting. Funders are restructuring agreements to comply with DBA regulations - for instance by avoiding remuneration tied directly to damages and using alternative return mechanisms - while continuing to back high-quality claims.

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Final Thoughts

The Supreme Court's ruling on PCP mis-selling marks a significant turn for the UK's financial and legal sectors. While it provides immediate relief to lenders by dismissing commission-disclosure claims, the continued scrutiny of DCAs and the impending FCA redress scheme underscore the enduring importance of consumer protection. For the litigation funding industry, this isn't a dead end but rather a redirection. The market's adaptability, coupled with the potential reversal of the PACCAR ruling and consistent demand for justice, suggests that litigation funding remains a dynamic and viable investment. Funders are now presented with new pathways to support claimants, particularly through the FCA's redress scheme, and to refine their strategies to align with evolving regulatory frameworks. This outcome reinforces the idea that even in a shifting legal landscape, there are persistent opportunities for capital to facilitate access to justice and generate returns.

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