Supreme Court Motor-Finance Commentary
On 1 August 2025, the UK Supreme Court delivered its decision in three linked appeals—Johnson v FirstRand Bank Ltd, Hopcraft v Close Brothers Ltd and Wrench v FirstRand Bank Ltd.
The Court took a middle course that many expected, rejecting a view that dealer-brokers are fiduciaries, but it upheld a claim that the relationship between Mr Johnson and a finance company was “unfair” under the Consumer Credit Act 1974.
Key points from the decision:
- No fiduciary duty/bribery rejected – Car dealers who sold vehicles and arranged financing do not owe fiduciary duties to customers. The Court therefore rejected the argument that undisclosed commissions automatically amount to a “bribe”.
- Unfair-relationship route upheld – The Court said a high, hidden commission can still make the relationship unfair under s.140A Consumer Credit Act 1974. In Mr Johnson’s case, a 54% discretionary commission (DCA) and the fact it was not disclosed to him rendered the agreement unfair, even without a fiduciary duty.
- Case-by-case assessment remains – Whether a deal is unfair will depend on commission size, what was disclosed, the borrower’s circumstances and compliance with FCA rules.
In short, the ruling closes the door on bribery claims but keeps a clear, evidence-based pathway open for consumers whose finance agreements involved large or hidden commissions.
FCA signals an industry-wide redress scheme
Within a day of the judgment, the Financial Conduct Authority (FCA) announced it would consult on a compensation scheme for customers whose car-finance agreements contained undisclosed DCA arrangements.
- Scale – The FCA estimates the cost at £9–18 billion, making it one of the largest consumer redress exercises since PPI.
- Timetable – A consultation paper is expected by early October 2025, with first payments projected for 2026.
- Regulator’s statement – FCA Chief Executive Nikhil Rathi said:
“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.”
What this means in practice
The Supreme Court closed the door on the bribery argument but left DCA-based cases very much alive—now likely to progress through an FCA-led redress scheme rather than mass litigation.
| Stakeholder | Key implications |
| Consumers | Clear win where commissions were high, undisclosed and linked to DCAs. Millions of agreements written between 2007 and 2020 may qualify for redress once the FCA scheme is finalised. |
| Lenders | “Flood-gates” moment avoided, but the FCA’s billion cost range still rivals PPI in scale. Boards need robust data, complaint handling and capital provisioning ahead of a data-heavy scheme. |
| Law firms & CMCs | Volume-driven book-building is no longer viable. Each claim must be triaged for commission size, disclosure and borrower vulnerability. Expertise and document analytics will trump mass marketing. |
| Litigation funders | Capital will flow to tightly screened, DCA-focused caseloads. Conservative structures, ATE cover and borrower-centric vetting—Fenchurch’s established approach—are now pre-requisites for sustainable returns. |
Fenchurch Legal’s position
Until now, we have maintained only a small exposure to PCP-commission claims, waiting for clear guidance from the courts and the regulator. With the Supreme Court judgment settled and the FCA’s redress-scheme consultation announced, that clarity has arrived.
Accordingly, we will widen our motor-finance portfolio but only into defined, evidence-rich DCA claims that mirror the Supreme Court’s guidance. Every case remains wrapped in risk-managed structures and underwritten against conservative recovery models.
The addressable market may have narrowed, and we expect a shake-out among opportunistic CMCs and anticipate partnering with specialist firms able to run fact-specific cases at scale.
Our approach remains unchanged:
- Strict underwriting based on documentary proof of a DCA breach.
- Compliance-led review of disclosure, affordability, and regulatory obligations.
- Conservative modelling with no inflated projections; all cases insured.
- Specialist partnerships combining robust triage, strong client relationships, and purpose-built technology.
Outlook
- Short-term (Q3 – Q4 2025). Heightened media attention, lender provisioning updates, and the FCA’s consultation paper in early October.
- Medium-term (2026): FCA finalises the statutory redress scheme, with first compensation payments expected late 2026. Most court and FOS cases likely to pause while the scheme operates.
- Long-term: The ruling sets a precedent that reshapes industry practices and legal strategies around consumer finance agreements.
Final word
The Supreme Court’s decision did not hand lenders a free pass—it clarified the rules of engagement. The idea that paying commission alone creates a fiduciary breach was always unlikely to succeed; if it had, it could have disrupted entire industries that rely on commission structures.
What Johnson confirmed, and what the FCA is now acting on, is that undisclosed, high, or discretionary commissions can create unfair relationships under the Consumer Credit Act. That is where the real legal weight has always been.
The FCA’s consultation will now determine how redress is delivered. Lenders’ share prices may have risen on relief that the scope is narrower than feared, but this is still a positive outcome for claimants with well-founded DCA cases.
In short, the path has narrowed but become clearer: evidence-based DCA claims remain firmly on track under a regulator-led framework. The winners will be well-capitalised lenders who prepare early, specialist advisers who understand the detail, and focused funders like Fenchurch Legal who combine strict underwriting with robust risk management. Transparency and proportionality are now the benchmarks—and we are well-positioned to deliver value for investors while supporting meritorious claims.
