UK Supreme Court Ruling in Motor Finance Commission Cases

At a Glance

• The Supreme Court overruled the Court of Appeal in finding motor dealers do not owe fiduciary duties to consumers, but pursue their own commercial interests. It follows that lenders were not liable as dishonest assistants or in the tort of bribery. A vague reference in small print to “a commission may be paid” is not sufficient to obtain the customer’s informed consent. Firms must disclose the fact, amount or basis of any commission — and must do so prominently, before the contract is signed.
• While the decision significantly reduces the legal risk for lenders in this space, that risk is by no means extinguished — discretionary commission arrangements (DCA) and non-DCA claims will still be brought and the cost of the redress scheme even in its narrowest form will be very substantial.
• In the meantime, even though it might be regarded as an extreme case, the finding of unfairness in Johnson means that compliance with disclosure obligations in commission-based selling scenarios, especially where commissions are high or relationships are tied, will remain under close scrutiny.
• The principles clarified by the Supreme Court will echo across other commission-based industries. Brokers and intermediaries — particularly in sectors like insurance, mortgage lending and energy — should review whether any part of their sales process implies a commitment that might give rise to a fiduciary relationship. The risk of inadvertently assuming the obligations of a fiduciary has not disappeared.

Background

The UK Supreme Court’s decision in the motor finance test cases — Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd, and Hopcraft v Close Brothers Ltd — handed down on 1 August 2025, has reset the legal landscape for commission disclosure and consumer protection in the motor finance industry. Whilst the judgment clarifies several legal uncertainties, it stops short of opening the legal claim floodgates to the extent some had anticipated, instead shifting the spotlight to the Financial Conduct Authority’s (FCA) proposed redress scheme — further details of which are below.

Summary of the Decision

The Supreme Court’s decision has been the subject of much commentary. In short, it overturned the Court of Appeal’s findings in two of the three conjoined cases. Its key conclusions are as follows:

• No fiduciary duty: Motor dealers do not owe fiduciary duties to consumers, but pursue their own commercial interests. Consumer trust alone is not enough to establish a fiduciary relationship; dealers are not fiduciaries simply by virtue of facilitating finance.
• No bribery: The law of bribery (secret commission) is only engaged where the recipient of the bribe is acting as a fiduciary. Because the dealers did not owe fiduciary duties to consumers, the payment of commission to the dealers by the lenders could not constitute a civil bribe.
• No dishonest assistance: Again, because the dealers owed no fiduciary duty, the lenders could not be liable in equity as dishonest assistants in the breach of that duty.
• Full disclosure is required: The Court overruled the previous approach in Hurstanger. A vague reference in small print to “a commission may be paid” is no longer sufficient. To obtain the customer’s informed consent, firms must disclose the fact, amount or basis of any commission — and must do so prominently, before the contract is signed.
• Burden of proof: The burden rests on the lender, broker or their assignee to prove that full disclosure was made to the consumer.
• Section 140A claim upheld (Johnson): In Johnson, the Court found that the relationship between lender and consumer was unfair for the purposes of section 140A of the Consumer Credit Act 1974 (CCA), due to the characteristics of the customer, the size and nature of the commission, the lack of transparency, and compliance with regulatory rules. The remedy awarded was full repayment of the commission paid, plus interest.

What Comes Next?

Implications for Claimants

In 2021, the FCA banned discretionary commission arrangements (DCAs, in which the broker was able to set the level of interest to be paid by the customer, with the broker’s commission being linked to the rate of interest charged). Substantial numbers of claims arose as a result of the sale of DCAs, and the FCA extended time-limits for consumers to bring complaints concerning DCAs (and for lenders to respond to them). Two appeals in DCA cases are pending before the Court of Appeal (to be heard in September 2025 and April 2026 respectively) which are likely to have a bearing on future claims in this space¹.

However, each of the cases before the Supreme Court related to non-discretionary commission arrangements (non-DCAs). It follows that the Court’s decision that the arrangement in Johnson was unfair for the purposes of section140A CCA has implications for claimants bringing or considering non-DCA claims. Johnson was a relatively extreme case on its facts (a 55% total charge for credit); and claimants will need to have close regard to it when assessing the merits of their own, potentially less extreme, position.

The FCA’s Proposed Redress Scheme

Two days after the Supreme Court’s judgment, the FCA announced its long-expected consultation on a proposed redress scheme for motor finance customers. This will be published in October 2025.

Key points regarding the FCA’s redress proposal are:

• The scheme should cover DCAs which were not properly disclosed. The FCA will consult on which non-DCAs should be included. The question of what amounts to inadequate disclosure is at large; as is the question of what size of commission in the context of the overall finance arrangements may point towards unfairness if not adequately disclosed.
• The FCA thinks the scheme should cover agreements from 2007 onwards. A look-back period of 18+ years would raise considerable practical challenges, particularly around document retention (in turn making the fairness assessment more difficult).
• Compensation may not be significant per agreement (currently estimated at less than £950), but the FCA estimates total redress costs could reach £9–18 billion.
• The FCA has yet to decide on whether the scheme will be opt-in or opt-out. However, it has made clear that it aims to make any scheme easy to participate in, so that consumers do not need to use a claims management company or law firm. This ambition may make an opt-out scheme more likely.

Implications Beyond Motor Finance

The Supreme Court’s decision will substantially curtail the wave of litigation which would have ensued had the Court of Appeal’s decisions in the three cases in question been upheld.

However, the principles clarified by the Supreme Court will echo across other commission-based industries. Brokers and intermediaries — particularly in sectors like insurance, mortgage lending and energy — should review whether any part of their sales process implies a commitment that might give rise to a fiduciary relationship. The risk of inadvertently assuming the obligations of a fiduciary has not disappeared.

Final Thoughts

The Supreme Court has drawn a clear line under the attempt to import fiduciary duties into ordinary car finance transactions. In some senses this is a common-sense outcome: many commentators have cited as a universal truth the point that car dealers act in their own commercial interests and no-one else’s.

While the decision significantly reduces the legal risk for lenders in this space, that risk is by no means extinguished — DCA and non-DCA claims will still be brought and the cost of the redress scheme even in its narrowest form will be very substantial.

In the meantime, even though it might be regarded as an extreme case, the finding of unfairness in Johnson means that compliance with disclosure obligations in commission-based selling scenarios, especially where commissions are high or relationships are tied, will remain under close scrutiny.

The immediate litigation wave may have subsided, but the regulatory tide is only just beginning to turn.