On Friday 1 August, the Supreme Court handed down its much anticipated judgment in the conjoined appeals concerning car finance commission arrangements: Hopcraft and another v Close Brothers Limited; Johnson v FirstRand Bank Limited t/a MotoNovo Finance (Appellant); Wrench v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2025] UKSC 33 (collectively referred to here as FirstRand). The ruling had been eagerly awaited, not only by the vehicle leasing sector but also by a range of other industries apprehensive about its potential ripple effects.
At the heart of each case lay a common arrangement: customers purchased vehicles using finance brokered by dealerships, which, in turn, received commission payments from the lenders. Critically, these agreements permitted dealers to set interest rates at their discretion, thereby inflating their commission (a practice now prohibited by the Financial Conduct Authority (FCA))[1]. In one instance, the commission was entirely concealed; in others, documentation alluded to the possibility of commission being paid. The Court of Appeal in November 2024 held that dealers owed customers a fiduciary duty, a duty to provide ‘disinterested’ advice.
The Supreme Court departed from that view. It held that the standard features of these transactions did not give rise to a fiduciary duty or a duty of ‘disinterested’ advice. The court concluded that the tort of bribery requires a fiduciary duty, which was not present in these cases, leading to the dismissal of the customers’ claims in equity and bribery.
In its judgment, the Court explained: “The regulatory regime, which the FCA operates on statutory authority, is not premised on car dealers when acting as credit brokers being subjected to the no profit and no conflict rules and having the obligations of full disclosure of a fiduciary. The regime seeks to provide consumer protection in a nuanced way by requiring the car dealer to disclose information to assist the customer where the information would materially affect his or her decision to enter into the transaction, and to disclose the amount of remuneration received from the finance company if the customer requests such information before entering into the transaction.” [2] This, in my view, affirms that the FCA does not impose fiduciary obligations upon car dealers functioning as credit brokers.
Of the three cases, the Supreme Court sided with lenders in two, effectively blocking most claims based on undisclosed commissions. However, Mr Johnson’s claim succeeded under section 140A of the Consumer Credit Act, on grounds that his relationship with FirstRand was unfair due to both the size of the hidden commission and the lack of transparency around a commercial tie. This outcome echoes the Supreme Court’s 2014 ruling in Plevin v Paragon Personal Finance Ltd, which similarly held that a failure to disclose an excessive commission under section 140A rendered the credit relationship unfair.
In response, the FCA announced on Sunday its intention to launch a consultation by early October 2025, aimed at establishing a consumer redress scheme, with payouts expected to begin in 2026. The FCA announced that there is no need to use claims management companies, and that successful claims are likely to attract compensation of less than £950 in most instances.
For the hundreds of cases that were paused pending the FirstRand judgment, claimants will now be weighing whether to abandon proceedings or await the FCA’s scheme.
The ruling will no doubt be welcomed across the vehicle leasing sector, and other commission-based industries, such as travel and accommodation, they are likely to exhale collectively. One need only consider recent disclaimers like ‘Commission paid and other benefits may affect an accommodation’s ranking’[3] on travel websites to appreciate the wider anxiety surrounding the implications of this litigation.
[1] From 2021
[2] [2025] UKSC 33 [265]
[3] www.booking.com
