Highlights on DWF's Perspective Regarding the Supreme Court Ruling on Secret Commissions
The Supreme Court's recent decision in the Johnson case has set a significant precedent for the future integrity of the motor finance market. The ruling protects the industry from baseless lawsuits while emphasising the need for transparency and fairness in dealer-lender relationships [1][2][5].
Ian Hughes, Director at Consumer Intelligence, commented on the ruling, stating that it provides clarity and stability to the market [1]. However, Brian Nimmo, Head of Redress at Broadstone, noted that providers are not completely off the hook, as each continuing claim will be judged individually based on the nature of the transaction [2].
The Supreme Court's judgment states that no disclosure or partial disclosure of commission alone will render a relationship unfair [2]. Cases with commissions over 50% of the total charge for credit are minimal [2]. John Perez, Partner and Head of Finance Litigation at DWF, commented that the Consumer Credit Market Claim (CMC) industry pursuing mass claims may collapse due to the narrowed legal basis for customer claims [1].
In response to the ruling, the Financial Conduct Authority (FCA) is launching a consultation on an industry-wide redress scheme expected in October 2025 [1][2][4][5]. This scheme will focus on compensating customers harmed by unfair dealer-lender relationships, particularly concerning undisclosed or high discretionary commissions. The FCA’s consultation will clarify how firms should assess unfairness under the Consumer Credit Act 1974 (CCA) and determine compensation, covering agreements dating back to 2007 [1][2][4][5].
The implications for the FCA’s redress scheme and the future market integrity are threefold. Firstly, the judgment removes the broad basis for fiduciary or equitable claims, reducing uncertainty and limiting baseless lawsuits against lenders and dealers [2][3]. Secondly, the focus shifts to regulatory-led remedies under the unfair relationship provisions of the CCA, with the FCA playing a key role in defining unfairness and appropriate compensation [1][2][4]. Lastly, the judgment and the FCA scheme are expected to enhance transparency and fairness in motor finance deals, supporting market integrity going forward [1][2][3].
The redress consultation process itself signals a proactive regulatory approach to consumer protection, which could deter future unfair commission practices and promote better disclosure and alignment of interests between dealers, lenders, and consumers [2][4]. Overall, the Supreme Court judgment refines legal liability while reinforcing the FCA’s central role in consumer redress and market oversight, helping to ensure a fairer and more transparent motor finance market in the future [1][2][4].
Kate Albert, CEO of PI specialist insurer Kova Professions, also commented on the Supreme Court case, emphasising the importance of transparency and fairness in motor finance transactions [3]. The ruling in the Johnson case highlights the individual facts of the case that made the relationship unfair, with the dealer's representations to the customer found to be false due to the lack of disclosure about ties with the lender, and the amount of commission (55%) being far too high compared to the total charge for credit [3].
In conclusion, the Supreme Court's decision on motor finance commissions has set a clear direction for the future of the market, focusing on transparency, fairness, and regulatory oversight. The FCA's upcoming redress scheme is expected to provide a fair solution for customers harmed by unfair practices, while promoting a more stable and ethical motor finance industry.
- The Supreme Court's ruling in the Johnson case has emphasized the need for transparency and fairness in the motor finance industry, particularly regarding dealer-lender relationships, as failures in these areas can render relationships unfair.
- The Financial Conduct Authority (FCA) is launching a consultation on an industry-wide redress scheme focused on compensating customers harmed by unfair dealer-lender relationships, which will also provide clarity on how firms should assess unfairness and determine compensation under the Consumer Credit Act 1974 (CCA).
- The FCA's regulatory-led remedies under the unfair relationship provisions of the CCA are expected to enhance transparency and fairness in the motor finance market, supporting market integrity and deterring unfair commission practices moving forward.
