Supreme Court Ruling Curbs Car Finance - Our Take On What It Means and Why You Should Diversify

In a landmark ruling last week, the UK Supreme Court delivered a huge blow to the majority of consumers by rejecting two of the three test cases seeking compensation for allegedly unfair car finance agreements.

The judgment significantly limits the scope for mass redress claims and halts a potential £44 billion compensation bill.

The decision hinged on whether car dealers had breached fiduciary duties by failing to disclose commissions earned from arranging finance. The court ruled that while dealers must act fairly, they are not generally acting as fiduciaries.

The ruling is potentially a heavy hit for those with exposure to claims-based car finance investment portfolios. Some funders had been relying on successful litigation outcomes and mass compensation payouts to generate returns. With the majority of claims now invalidated, we are yet to see the impacts of the recent decision.

Our Decision to Steer Clear of Small-Value, High Volume Portfolios

At Balqis Capital, this ruling validates a fundamental principle that underpins our investment philosophy: we do not engage in small-value, high-volume assets such as consumer car finance claims. We also feel that our pipeline of non litigation assets are preferred given the requirements for transparency and sector deversification from our clients.

While some competitors have pursued these portfolios in the hope of extracting returns at scale, our position is clear. The margins are not there and we feel the risk is disproportionately high.

Such investments are often exposed to:

• Thin profit margins that are quickly eroded by legal or compliance costs
• Regulatory unpredictability, as demonstrated by this very case
• Litigation risk, where thousands of small-value claims can snowball into costly disputes

Strategic Implications for Investors: Value Over Volume

The court’s decision reinforces why investors should be cautious about concentrating their capital in any single asset class. At Balqis Capital, we suggest a robust, diversified approach. Our flagship product, is built on the principles of diversification, risk management and transparency. The bond offers access to a well-balanced high value portfolio of secured private credit investments, carefully selected to avoid volatile consumer-facing sectors and legal grey areas.

The Balqis Capital Bond offers:

✅ High-yield fixed return - 10.25% fixed return, significantly above traditional fixed Income ✅ Short duration with maturity in December 2026 ✅ Asset-backed security – real assets, receivables and contractual claims ✅ Institutional-grade leadership - led by a former PwC M&A accountant who worked for Goldman Sachs and a corporate lawyer, both with a proven track record of executing UK listings ✅ Exclusive Access - offering private investors exposure to high-quality private credit strategies traditionally reserved for institutions ✅ Minimum USD 50k subscription ✅ Investment into a regulated fund

Alan Graham, Director of Balqis Capital, said: “This ruling marks more than a legal precedent, it serves as a cautionary tale. The car finance sector, once seen as a promising niche for litigation-linked returns, has now proven itself to be potentiall fraught and, in most cases, financially unviable.

“We would urge investors not to chase volume at the expense of value and not to put all their eggs in one basket,” he added.

For more information about diversifying your portfolio, contact the Balqis Capital team to arrange a call. Click here to contact us.