Editor’s note: This story was first published on Friday 01 August 2025, and has since been revised and updated on Saturday 02 August 2025.
PAYOUTS by car finance companies are expected to be at the lower end of expectations following the Supreme Court’s ruling on discretionary commission arrangements.
The Supreme Court threw out two of the three cases the Appeal Court allowed back in October 2025 and which surprised the car finance sector.
In the third case – Johnson v FirstRand Bank (which trades as MotoNovo in the UK) – the Supreme Court ruled that the finance agreement was unfair under the Consumer Credit Act 1974.
However, giving the judgement, Lord Reed said “the Court of Appeal made a number of mistakes in reaching its decision” but the “finance company was unfair”. He awarded Mr Johnson the commission payment plus interest. This figure amounts to £1,650.95 plus interest.
The Supreme Court decision is likely to mean far fewer cases will succeed in future. City analysts had previously put the level of exposure faced by banks at up to £44 billion. It is now understood to be significantly lower, possibly in the single-digit billions.
Commenting on the Supreme Court case, an FCA spokesperson said:
“We want to bring greater certainty for consumers, firms and investors as quickly as possible.
“We will be working through the weekend to analyse the judgment and determine our next steps.
“We said we would set out within six weeks whether we would consult on a redress scheme. But we want to provide clarity as quickly as possible.
“So, we will confirm whether we will consult on a redress scheme before markets open on Monday 4 August.
“Our aims remain to ensure that consumers are fairly compensated and that the motor finance market works well, given around 2 million people rely on it every year to buy a car.”
Geldards LLP lawyer Jonathan Butler, who works with the Vehicle Remarketing Association, said:
“The fact the FCA had swiftly issued a statement about a possible redress scheme, meant that it was more likely than not to happen but that consumers would have to meet the same level as that in the Johnson case.
“The claims that are out there still are for people that can show that there was a discretionary element to the agreements that they entered into and that can align themselves really with the circumstances in which Mr Johnson found himself.”
The three car finance cases hinged on three arguments
- Firstly, the commission paid to retailers by the finance firm was a bribe.
- Secondly, that retailers had a fiduciary duty to customers.
- And finally, that the agreement was unfair under the Consumer Credit Act 1974.
The court ruled that retailers do not have a fiduciary duty to the customer and that the bribery argument did not apply because commission is not a bribe.
These two points meant that the cases of Wrench v FirstRand Bank and Hopcraft v Close Brothers were dismissed as they only argued the first two points.
However, the case of Johnson v FirstRand which also argued the finance agreement was unfair was upheld on that point. Johnson was awarded the original commission payment plus interest.
Explaining this, Lord Reed said: “The statutory test of unfairness under the Consumer Credit Act allows courts to take account of a very broad range of factors and is highly fact-sensitive.
“There are three relevant factors on the facts of Mr Johnson’s case. First, the size of the commission paid by the finance company to the dealer.
“It amounted to 55% of the total charge for credit. The fact that the undisclosed commission was so high is a powerful indication that the relationship between Mr Johnson and the finance company was unfair.
Secondly, it is highly material that the documents provided to Mr Johnson did not disclose the existence of a commercial tie between the finance company and the dealer, under which the finance company was given a right of first refusal of customers referred by the dealer.
“Thirdly, on the other side of the scales, is Mr Johnson’s failure to read any of the documents provided by the dealer. However, Mr Johnson was commercially unsophisticated and the court questions the extent to which a finance company could reasonably expect a customer to have read and understood the detail of such documents, particularly when no prominence was given to the relevant statements.
“For these reasons, the court holds that the relationship between Mr Johnson and the finance company was unfair and that the finance company should pay the amount of the commission to Mr Johnson with interest at a commercial rate from the date of the agreement. For the reasons I’ve explained, the other customers’ claims are rejected.”
Picture credit: UK Supreme Court
The Supreme Court judgement was a strong ruling to come out with.
Mike Thompson, Operations Director of Leasing Options, considers the outcome of the Supreme Court ruling for leasing brokers
The key takeout from the Supreme Court judgement is that brokers don’t hold a fiduciary duty to the customer. Within that the Supreme Court has overturned the Court of Appeal decision that non disclosure is not bribery or dishonest assistance – therefore without fiduciary duty there is no liability about commission being disclosed. It provides much‑needed legal clarity on car finance commission arrangements.
For me, common sense has prevailed.
However, the judgment does not close the debate around commission structures. The Financial Conduct Authority (FCA) continues to investigate Discretionary Commission Arrangements (DCAs), where dealers could increase customer interest rates to boost commission.
The FCA has indicated that an industry‑wide redress scheme could be proposed as early as September 2025 and we are preparing for any industry‑wide outcomes, including the potential for redress.
This is a moment for the sector to further show leadership in rebuilding consumer trust through transparency and consistency. The high standards of Leasing Options, and so many of our peers also aim for, needs to be the norm and not unusual
Five main points for the leasing broker sector to consider following the Supreme Court ruling
1 Need to look at the disclosure structure – there must be no implied fiduciary duty. We need to make sure we all have robust structures there
2 Commission model – there will continue to be a focus on this. It’s best practice to be upfront about commission with consumers.
3 Regulatory watch – as brokers we need to assist with transparency with the model or brace for a rebuild in disclosure practice in variable commission models.
4 Everybody needs to look at contractual language – there must be no implicit duty that could expose liability. Our language must be clear for the consumer.
5 We all need to prepare for the DCA piece – currently under FCA review.
Additional commentary on the outcome of the Supreme Court decision
HM Treasury spokesperson
“We respect this judgment from the Supreme Court and we will now work with regulators and industry to understand the impact for both firms and consumers.
“We recognise the issues this court case has highlighted. That is why we are already taking forward significant changes to the Financial Ombudsman Service and the Consumer Credit Act.
“These reforms will deliver a more consistent and predictable regulatory environment for businesses and consumers, while ensuring that products are sold to customers fairly and clearly.”
Stephen Haddrill, Director General of the FLA
“This judgment is an excellent outcome. It properly reflects the role and responsibilities of dealers, lenders and customers, and it has restored certainty and clarity to the largest point-of-sale consumer credit market in the UK. In addition, it has also restored confidence to the sector, confirming that it remains a solid investable option – which in turn means the supply of affordable motor finance will continue for customers.
“Cars are an essential part of UK life – and for many people, relying on a car means relying on motor finance. It’s a product that’s trusted and valued by our customers – just over 80% of new cars are bought on finance, as is a large percentage of used cars.
“The FCA now has the legal clarity to continue its work to establish if a redress scheme is needed, and of course the thousands of unfounded complaints submitted to lenders by claimant law firms and CMCs can now be removed from the system.”
Sue Robinson, NFDA Chief Executive
“We are pleased with the Supreme Court’s decision in relation to the FCA’s Motor Finance Review. NFDA provided both written and oral submissions that have helped the Supreme Court reach this verdict. As the consumer facing part of the sector, NFDA wants to see the regulator act fairly to ensure that UK consumers receive a satisfactory result. This has been achieved today.
“Automotive retail accounts for approximately 78% of the broader automotive workforce, we provide a perspective that is at the coal face of dealing with customers. As we move forward from this case NFDA will continue to provide support to its members ensuring that the UK has a healthy and functioning motor retail market.”
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Tristan Young is an award winning journalist with more than 25 years’ experience reporting on the automotive industry focussing predominantly on fleet and retail. As a self-confessed petrol-head, Tristan has a weakness for car classifieds. When he’s not writing about the automotive industry, he can usually be found outdoors with a small pack of border collies.
