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Car finance ruling: Full timeline and context explained
Explore the background and impact of the car finance ruling on Discretionary Commission Arrangements
Words by: Andrew Woodhouse
Additional words by: Auto Trader
Last updated on 5 August 2025 | 0 min read
The information in this article has been superseded by the latest Supreme Court ruling – click here for what that means or read on for a sense of how we got here!
The UK automotive finance market has gone through months of uncertainty following a series of high-profile legal rulings on commission disclosure. What started as a pause in new car finance agreements after the Court of Appeal decision has now had a final ruling from the UK Supreme Court. This article summarises what happened, the legal outcomes, and what comes next for consumers, dealerships, and finance lenders.
The UK automotive finance market has gone through months of uncertainty following a series of high-profile legal rulings on commission disclosure. What started as a pause in new car finance agreements after the Court of Appeal decision has now had a final ruling from the UK Supreme Court. This article summarises what happened, the legal outcomes, and what comes next for consumers, dealerships, and finance lenders.
The initial Court of Appeal ruling found some buyers may have been mis-sold car finance
Back in 2024, the Court of Appeal ruled in favour of three consumers who claimed they had been mis-sold car finance. They argued that car dealers, acting as credit brokers, failed to disclose commissions paid by finance lenders on hire purchase (HP) and personal contract purchase (PCP) agreements.
The Court of Appeal found that: • A broker could not lawfully receive a commission without the customer’s fully informed consent. • Car dealers acting as credit brokers owed a fiduciary duty to customers, requiring them to act solely in the customer’s best interest. • Failure to disclose commissions could make the finance agreement legally vulnerable. This ruling prompted several motor finance companies to temporarily pause new lending while they reviewed documentation and compliance processes. Business gradually resumed after lenders updated their systems to reflect the court’s emphasis on transparency.
The Court of Appeal found that: • A broker could not lawfully receive a commission without the customer’s fully informed consent. • Car dealers acting as credit brokers owed a fiduciary duty to customers, requiring them to act solely in the customer’s best interest. • Failure to disclose commissions could make the finance agreement legally vulnerable. This ruling prompted several motor finance companies to temporarily pause new lending while they reviewed documentation and compliance processes. Business gradually resumed after lenders updated their systems to reflect the court’s emphasis on transparency.
The UK Supreme Court decision 2025 overturned these rulings
The story did not end there. Three linked cases, Hopcraft v Close Brothers, Johnson v FirstRand and Wrench v FirstRand, were appealed to the Supreme Court. They argued that these commissions were secret profits or bribes, constituting a breach of fiduciary duty.
In August 2025, the Supreme Court overturned much of the Court of Appeal’s reasoning, ruling largely in favour of finance lenders: • They ruled dealerships were not fiduciaries to customers and were acting in their own commercial interests, not as impartial advisors. • The court also clarified that, because dealerships are not legally obligated to act as trusted representatives for their customers, there was no basis to claim that commissions amounted to bribery or any other legal wrongdoing under this context. One claim, Johnson vs FirstRand, succeeded under section 140A of the Consumer Credit Act (CCA). An undisclosed 25% commission, which came to 55% of the interest he was paying on the car was commission, was found to have created an “unfair relationship” and so the Supreme Court ruled in Johnson’s favour. In short, the Supreme Court confirmed that the traditional commission-based dealership finance model remains lawful, but undisclosed high commissions can still break the rules under the CCA.
In August 2025, the Supreme Court overturned much of the Court of Appeal’s reasoning, ruling largely in favour of finance lenders: • They ruled dealerships were not fiduciaries to customers and were acting in their own commercial interests, not as impartial advisors. • The court also clarified that, because dealerships are not legally obligated to act as trusted representatives for their customers, there was no basis to claim that commissions amounted to bribery or any other legal wrongdoing under this context. One claim, Johnson vs FirstRand, succeeded under section 140A of the Consumer Credit Act (CCA). An undisclosed 25% commission, which came to 55% of the interest he was paying on the car was commission, was found to have created an “unfair relationship” and so the Supreme Court ruled in Johnson’s favour. In short, the Supreme Court confirmed that the traditional commission-based dealership finance model remains lawful, but undisclosed high commissions can still break the rules under the CCA.
The FCA are now exploring a redress scheme and consumer compensation
The Financial Conduct Authority (FCA) is currently designing a redress scheme for affected customers. This will include car finance deals with discretionary commission arrangements (DCAs) and may include other non-discretionary commission arrangements.
The key points under consultation include: • Scope and duration: Complaints may be covered back to 2007, though agreements closed before 2014 may need Treasury intervention to be included. • Basis for redress: If the scheme is based solely on the Consumer Credit Act, hire agreements such as Personal Contract Hire (PCH) may be excluded. If based on CONC (Consumer Credit Sourcebook), PCH could be included. • Compensation: Most individual payouts are expected to be under £950, with interest of around three per cent added. • Pause on complaints: The existing pause on handling consumer complaints is likely to be extended to align with the redress timetable. It certainly seems the FCA believe the practices introduced to improve transparency as a result of the original Court of Appeal judgement have driven an improvement in consumer outcomes, and align with their Consumer Duty outcomes. So we hope to see transparency and informed consent are now embedded expectations.
The key points under consultation include: • Scope and duration: Complaints may be covered back to 2007, though agreements closed before 2014 may need Treasury intervention to be included. • Basis for redress: If the scheme is based solely on the Consumer Credit Act, hire agreements such as Personal Contract Hire (PCH) may be excluded. If based on CONC (Consumer Credit Sourcebook), PCH could be included. • Compensation: Most individual payouts are expected to be under £950, with interest of around three per cent added. • Pause on complaints: The existing pause on handling consumer complaints is likely to be extended to align with the redress timetable. It certainly seems the FCA believe the practices introduced to improve transparency as a result of the original Court of Appeal judgement have driven an improvement in consumer outcomes, and align with their Consumer Duty outcomes. So we hope to see transparency and informed consent are now embedded expectations.
Now, discretionary and non-discretionary commission arrangements are classed as distinct
A key takeaway from the ruling is that discretionary commission arrangements (DCAs) and non-discretionary arrangements are being treated as separate things.
• Discretionary Commission Arrangements (DCAs) were found to be a blanket regulatory breach by the Finance & Leasing Association (FLA), so these are expected to form the core of any FCA redress scheme. • The Supreme Court ruled non-DCAs should be assessed case by case, as not knowing about a commission does not automatically make it unlawful. The FCA has indicated that any redress scheme will likely focus on DCAs first. They will consult on which non-DCA arrangements should be included. This approach could help clear the backlog of paused non-DCA complaints that accumulated after the Court of Appeal ruling.
• Discretionary Commission Arrangements (DCAs) were found to be a blanket regulatory breach by the Finance & Leasing Association (FLA), so these are expected to form the core of any FCA redress scheme. • The Supreme Court ruled non-DCAs should be assessed case by case, as not knowing about a commission does not automatically make it unlawful. The FCA has indicated that any redress scheme will likely focus on DCAs first. They will consult on which non-DCA arrangements should be included. This approach could help clear the backlog of paused non-DCA complaints that accumulated after the Court of Appeal ruling.
What this means for consumers
The upcoming redress scheme should provide a path to compensation for cases involving high, undisclosed commissions. Given that Johnson won his case, we can also expect future cases in which an unfair relationship can be shown to be brought forward – though details of what that may look like are unclear at this time.
The push for clear disclosure of commissions and transparency in record-keeping should help car buyers make more informed decisions, though the ruling has stated that motor dealers are not fiduciaries and are not required to act with undivided loyalty to customers – i.e. they can act in the interest of further profits. While the legal storm has mostly cleared, the next phase of FCA consultation and the rollout of a redress scheme will determine the final cost.
The push for clear disclosure of commissions and transparency in record-keeping should help car buyers make more informed decisions, though the ruling has stated that motor dealers are not fiduciaries and are not required to act with undivided loyalty to customers – i.e. they can act in the interest of further profits. While the legal storm has mostly cleared, the next phase of FCA consultation and the rollout of a redress scheme will determine the final cost.