August 2025
The Supreme Court has overturned in part the landmark Court of Appeal (CoA) judgment regarding Motor Finance commissions, setting out that:
- neither a disinterested duty nor a fiduciary duty was owed by the dealers to their customers, overturning two out of three of the claims entirely; and
- there was a breach of the Consumer Credit Act, 1974 (the ‘CCA’ or the ‘Act’) on the basis of an unfair relationship, upholding one of the three claims (Johnson).
Whilst the Johnson judgment1 was case fact specific, the Supreme Court outlined several factors which could indicate an unfair relationship under the CCA taken from the FCA’s submission to the Court. Noting the fact that the size of the commission (55%) was high and a powerful indication the relationship was unfair, this was added to by the fact that this commission was undisclosed. The commercial tie between the dealer and the lender was also material.
Responding to the judgment over the weekend, the FCA2 has subsequently confirmed that they will consult on a Redress Scheme (the Scheme), covering how firms should assess whether the relationship between the lender and borrower was unfair for the purpose of the scheme and if so, what compensation should be paid.
Continuing their engagement with firms, by early October they will set out further details on the scope and parameters for a planned six-week consultation.
The FCA has been clear that they remain focussed on moving at pace with the aim to finalise the rules such that the Scheme can launch in 2026, with consumers starting to receive compensation next year.
Whilst the judgment has without doubt limited the impact of the original CoA decisions, it has also introduced potential complexity relating to how differing and case specific factors may need to be balanced to determine fairness under the CCA and the impending Scheme rules.
A material Redress Scheme remains likely, with the FCA estimating the cost of redress between £9bn and £18bn. KPMG in the UK explores what has happened, what it means and what happens next for Motor Finance firms