On 1 August 2025 the Supreme Court ruled on three linked appeals related to motor finance commissions. In all cases, motor dealers received commissions from lenders for introducing customers to hire purchase finance, where it was claimed customers were not properly informed about the commissions. The Supreme Court judgement followed a Court of Appeal judgement on 25 October 2024, which found it was unlawful for brokers to receive commission from a motor finance provider without obtaining the customer’s informed consent.
The FCA subsequently confirmed on 3 August 2025 that it would proceed with a redress scheme. It expects to consult on the approach and scope of the scheme by early October. The consultation will last six weeks and FCA expects consumers will receive compensation during 2026.
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What does this mean?
The Supreme Court unanimously ruled that car dealers did not owe fiduciary or disinterested duties to their customers in these typical car finance transactions. As such no fiduciary relationship existed, and no basis for common law bribery or equitable liability arose.
Although the fiduciary and bribery claims failed, one claimant succeeded with a claim that the arrangement was an ‘unfair relationship’ under the s140 of the CCA due to:
The significance of the commission (25% of the advance of credit and 55% of the total charge for credit), which remained undisclosed.
Documentation presented a false impression the dealer was offering products from a panel of lenders when in fact there was a commercial tie with a particular lender. This was deemed highly material.
The level of detail in documentation, with no prominence given to key statements, made it questionable that a customer could reasonably be expected to understand them.
The Court noted a broad range of factors should be considered when determining whether unfairness has resulted under the CCA. In the case of Johnson vs FirstRand Bank Limited (London Branch) t/a MotoNovo Finance, where the Court found the combination and severity of factors, on balance, created an ‘unfair relationship’, the Court ordered reimbursement of the commission with interest at a commercial rate from the date of the agreement.
The Supreme Court’s judgement significantly narrows the scope for mass redress based on secret commission claims, rejecting the Court of Appeal’s broader interpretation. However, the scope for consumer redress remains unclear as the combination of factors that could lead to an unfair relationship, together with the detail of the FCA’s redress scheme, has yet to be defined.
Following the judgement, the FCA confirmed its intention to consult on a redress scheme by early October 2026. In line with the Supreme Court, the FCA has commented that fairness assessment will depend on the interaction between:
the size of the commission relative to the charge for credit
the nature of the commission, for example, whether it is discretionary
the characteristics of the consumer
compliance with regulatory rules
the extent and manner of disclosure.
The FCA suggests that firms may need to consider cases as far back as 2007, and will work with the sector to determine how to deal with gaps in documentation in earlier years. Discretionary commission agreements will be in scope, and the FCA will consult on the basis on which non-discretionary commission will fall into scope.
Questions remain as to whether the redress scheme will be on an opt-in or opt-out approach, the relevance of customer sophistication, how firms will obtain information in relation to cases that stretch back to 2007 and whether the current hold on complaints will be extended.
What do firms need to do?
Analyse their data to highlight potentially unfair cases by devising a working definition and parameters. This should be informed by the characteristics, including the commission amount in comparison to the cost of credit, commercial ties with a lender and sufficiency of disclosure and prominence afforded to key features.
Begin to scope a sales process review, considering relevant CCA and CONC rules, looking at data gaps and in the absence of further clarity considering the potential factors impacting ‘unfairness’.
Update customer communications accordingly.
Given the FCA’s decision to take forward a redress scheme, firms must engage with the regulator ahead of any publications, considering the practical implications for their business, including access to data; the FCA is proactively engaging with the industry ahead of publication of the formal consultation.
Firms must make an assessment of the implications of the Supreme Court’s ruling on what constitutes an ‘unfair relationship’ under the CCA, in particular reviewing the extent to which levels of commission, disclosure of commissions and wider client communications may on balance have resulted in harm.
Firms should now be considering how they will input to the consultation, before and during the consultation process, in a constructive manner to shape key considerations that will help frame a response to the scheme (what defines unfair, challenges with CMCs, gaps in information, etc.) to help close down areas requiring further clarity.
“It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated. We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.”
Next steps
The FCA expects to consult on the scope and methodology of the scheme by early October 2025, with significant activity with firms and trade associations ahead of this. The final scheme will likely launch in 2026.
Contacts
Sajedah Karim
Martin Hislop
Iqvinder Hunjan
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