On 1 August 2025, the long-awaited Supreme Court decision relating to car finance commission payments was handed down. We look at what that means legally and where this leaves motor finance claims generally.

Background to motor finance commission cases

The core issue in these cases involves the payment of commissions to car dealerships by lenders for the arrangement of car finance. Such commission arrangements can often involve discretionary commission arrangements (DCA) where dealers could set the rate of interest rate or APR paid by the customer, on behalf of the lender.  Such commission arrangements were banned by the Financial Conduct Authority in January 2021, and since then, many customers have brought claims challenging those commissions.

Three such customers’ claims have now been heard by the Supreme Court, giving a definitive answer on the legal landscape.  The three cases were all slightly different:

• ‍Johnson – although the commission was on the now banned DCA model, the interest rate selected was the lowest available, so that the dealer received a fixed commission of £1,650.95, which was 26% of the advance of credit.  There was some disclosure of the commission, as the fact of it was mentioned in the agreement’s terms and conditions and in a suitability document provided.‍
• Hopcroft – the commission paid was £183.26 but it was not known how it was calculated.  The commission was not disclosed at all.‍
• Wrench – commissions of £179.85 and £408.98 were paid.  The commission on the second loan was calculated under a DCA but at the lower end of the rates available.  There was disclosure of the fact of commission in the small print terms and conditions.

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Key Findings in the Supreme Court’s judgment

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Fiduciary duty and “disinterested duty”

The Supreme Court looked at the role played by car dealers and whether they could be said to be fiduciaries.  The key task identified by the Court was to find the boundary between normal (self-interested) arm’s length activity and circumstances where fiduciary duties would be recognised which require that party to put aside their own interests to act altruistically in the interests of another: i.e. were car dealers entitled to act in their own interest, or would they be regarded as having to act in the interests of their customers.  In a wide-ranging review of the extensive case law, the Supreme Court found that dealers were not fiduciaries.  The dealers were found to have their own arm’s length role in a car sale with an interest in selling cars to customers.  As such, their role was anything but neutral and could not create a fiduciary relationship: “No reasonable onlooker would think that, by offering to find a suitable finance package to enable the customer to obtain the car, the dealer was thereby giving up, rather than continuing to pursue, its own commercial objective of securing a profitable sale of the car”.  

Yet further, the Supreme Court found that even in circumstances where the dealer had offered to seek the most suitable finance package for a customer, this would not amount to an undertaking of fiduciary loyalty.  In the Supreme Court’s words, “an offer to find the best deal is not the same as an offer to act altruistically”.  Whilst the existence of trust and confidence has always been part of fiduciary relationships, the Supreme Court was also keen to point out that the trust and confidence required to establish a fiduciary relationship is that the fiduciary will act with single-minded loyalty, to the exclusion of its own interests. This is different from any element of trust and confidence existing in a dealer/customer relationship.  It remains to be seen how the courts will deal with transactions where there is a finance broker who has no personal interest in the transaction, other than to source finance for the customer, who fails to adequately disclose commissions.

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Bribery

Rejecting the lenders’ submissions that the tort of bribery should be abandoned, the Supreme Court went on to look at what type of relationship would engage the tort of bribery.  In the lower courts, the requirement for a fiduciary relationship had been watered down to being that of owing a duty to provide information, advice or recommendations on a disinterested basis.  Where that test was met, and there had been no disclosure of commissions, then this would give rise to common law remedies.  If there had been partial disclosure, then the remedy would lie in equity, but only if a fiduciary relationship existed. Overturning the decision in Wood v Commercial First Business Limited, the Supreme Court decided that the law of bribery does indeed require a fiduciary relationship to exist as an essential requirement, and the lesser test set out in Wood was an error.  A purely contractual duty to give disinterested advice is very different from the consequences which arise from a fiduciary duty of loyalty.

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Secrecy‍

Bribes are also known as secret commissions. The Supreme Court went on to look at in which circumstances secrecy would be negated.  In this regard it should be remembered that the payment of commission is not in itself wrong, it’s the secrecy which surrounds it which can mean that the fiduciary is induced to act contrary to the obligation of loyalty owed to his principal.  In order to avoid this, disclosure must be made.  What amounts to disclosure may depend on the circumstances of each case. However, setting aside the reasoning in the prior case of Hurstanger v Wilson, the Supreme Court went on to find that partial disclosure of commission has never been enough.  What disclosure must be made will be a question of fact for each case.

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The role of existing legislation‍

Whilst separate from the common law, the Supreme Court went on to look at the role that existing legislation in this area may have to play in the wider commercial context.  Focussing on the Consumer Credit Act 1974 and the Consumer Credit Sourcebook (CONC), the Court identified that the disclosures required on dealers under CONC (at the relevant time) were less than those imposed on fiduciaries, with disclosure of the existence of commission required only where the commission had the potential to affect the broker’s recommendation or would have a material impact on the customer’s transactional decision – i.e. helping the customer to make an informed decision.  Even after the FCA introduced changes to CONC in 2021, the disclosures required were still less than those imposed on fiduciaries.

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Lender liability‍

Taking all of this into account, the Supreme Court found that car dealers should be regarded differently from other brokers, such as those involved in mortgage broking, because their credit brokering services were not being provided as a distinct and separate service; it was just part of the wider transaction in which the dealer was selling the car to the customer.  Further, the dealers had not given any form of express undertaking to put aside their own commercial interest in selling the car to the customer and they did not have the authority to enter the customers into a legal relationship with a lender.  In a somewhat startling analogy, the Supreme Court found that the role of a dealer, in arranging significant finance for customers to allow them to purchase cars, was no more than would be received from a standard shop assistant. Accordingly, the dealer was a separate player in the transaction from start to finish and there was no undertaking of fiduciary loyalty.  As such there would be no liability on the lenders for their roles in the transactions.

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Unfair relationship under the Consumer Credit Act

s.140A-B of the Consumer Credit Act allows a court to find a credit relationship to be unfair based on a wide number of factors and giving the court wide discretion in its findings.  This only applied to Mr Johnson’s case, where a commission of £1,650.95 had been paid by the lender to the dealer, which was 25% of the amount of credit taken out and 55% of the total charge for credit.  There had been partial disclosure of commission and no disclosure at all of the commercial tie between the dealer and lender which required the dealer to give the lender, FirstRand, the right of first refusal on all finance agreements which the dealer proposed.  The Supreme Court upheld the lower court’s decision that this created an unfair relationship.  There had been limited disclosure of the fact of commission, but this had been hidden in a mass of other terms and had not been highlighted to him, and the Supreme Court found that it was question able to what extent a lender could or would reasonably expect a customer to have read and understood the content of the documents provided.  Given the size of the commission, it should have been more prominently displayed and the customer’s attention expressly drawn to it.  Yet further, the commercial tie between the dealer and FirstRand had not been disclosed at all, and in fact, the documentation suggested that the dealer would search its panel of lenders for Mr Johnson, when in fact it was contractually obliged to refer all business to FirstRand first.  Yet further, this was also a breach of CONC. As a result, the relationship was unfair and Mr Johnson was entitled to the return of the commissions plus interest at an appropriate commercial rate from the date of the agreement.

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Implications of the Supreme Court’s decision

The Supreme Court’s decision has overturned the Court of Appeal’s consumer friendly judgment and narrowed the situations in which undisclosed motor finance commissions will lead to customer redress.  Importantly, it has found that there is no fiduciary relationship between a car dealer and customer, and therefore no common law remedies available.  However, the decision on an unfair relationship in Mr Johnson’s case is important.  It means that motor finance lenders have not escaped free from all liability and that there is still a route for customers to pursue, albeit the circumstances giving rise to liability may be narrower.  In delivering its judgment, the Supreme Court noted that there were a number of factors that might point to an unfair relationship, being:

• The size of the commission relative to the total charge for credit
• The nature of the commission, such as whether it was a DCA
• The characteristics of the consumer
• The extent and manner of disclosure
• Compliance with the rules

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As noted within the judgment itself, the Supreme Court also made clear that the test for an unfair relationship remains highly fact specific, with a very broad range of factors able to be taken account of with application on a case by case basis being necessary.

Whilst motor finance lenders may have avoided redress on mass, this does not mean that they will not be found liable, just that each case is likely to be different and assessed on its own individual merits.

The FCA has stated that it will announce on whether a widespread redress scheme will be introduced before the markets open on Monday 4 August 2025 and we wait to see how that will evolve.

In the meantime, whilst car dealers may not be fiduciaries, it is clear that non-disclosure of commission in this sector has not been given the green light.