After the Supreme Court Judgement – What’s Next for Motor Finance Claims in the UK?

• On 1 August 2025, the UK Supreme Court handed down the long-awaited judgement in Johnson v. First Rand Bank Limited,¹  and the two associated cases. These cases involve claims brought by consumers against lenders of motor finance, seeking remedies in respect of commission paid to motor dealers who acted as credit brokers.
• In October 2024, the Court of Appeal gave an expansive ruling, permitting a wide variety of claims to be brought. The Supreme Court’s judgement largely overturns that decision. The scope for successful claims remains significant but is (a) narrower, and (b) claims will likely need to be considered more closely on their merits.
• On 3 August 2025, the UK Financial Conduct Authority (FCA) announced that it would, by October 2025, publish a consultation paper proposing a consumer redress scheme to deal with commissions, which were paid under “discretionary commission arrangements” and which were not “properly disclosed”. The FCA has said that the redress scheme could also deal with other “unfair” cases (such as “high commission” cases) where there was insufficient disclosure. The consultation is due to last six weeks, and the FCA proposes that the scheme would be operational in 2026.
• After an introduction, this alert is in three broad sections: (i) the scope of available claims under the Supreme Court’s decision, (ii) an explanation of the FCA’s statement on a consultation for a consumer redress scheme, and (iii) what both of these will mean for claims management companies and their funders in particular.

Background

The types of consumer credit arrangements at issue in all of the relevant motor finance cases are “three-cornered” transactions. Motor dealers would offer a car for sale, which a member of the public would then see and wish to purchase for a price agreed between them. The motor dealer could then act as a credit broker, obtaining an offer for finance from a lender. The consumer could choose to enter into that agreement with the lender, on certain different types of terms − such as hire-purchase. Usually, the motor dealer would then receive a commission from the lender for its work as credit broker.

At heart, the issues arise from that commission payment, and whether that was lawful.

DCA Cases

In a subset of these cases, known as “discretionary commission arrangement” (DCA) cases, the credit broker was able to set the level of interest to be paid under the finance arrangement to a level within parameters set by the lender, and they would receive an additional commission which would increase if the interest rate was higher than the minimum interest rate permitted by the lender.

DCA cases first drew widespread attention in January 2024, when the UK Financial Ombudsman Service (FOS) upheld two claims, one against Black Horse Limited (here) and the other against Clydesdale Financial Services Limited (here), in relation to finance agreements where there had been a DCA.

The FOS found that DCA cases showed a breach of the FCA’s Consumer Credit Sourcebook (CONC) and Principle 6 of the FCA’s Principles for Businesses (treating customers fairly), as well as finding that the consumer credit relationship was “unfair” under s.140A of the Consumer Credit Act 1974 (CCA).²  As a result, the FOS found that the consumers should recover (with interest) the difference between the interest they paid, and the interest they would have paid had the minimum permitted interest rate been selected.

The Clydesdale decision was upheld by the High Court on judicial review,³  and an appeal of that decision is due to be heard in September.⁴

Non-DCA Cases

From January 2024 until October 2024, the general attention was focused on DCA cases. The FCA put in a moratorium on time limits to deal with complaints about DCA cases, and signalled that the regulator was considering putting in place a market-wide consumer redress scheme.

In October 2024, however, the Court of Appeal decided Johnson,⁵  which dealt with non-DCA claims.⁶  The Court of Appeal found that:

• The dealers in those cases had a fiduciary duty when they acted as credit brokers.
• The dealers undertook a duty to act in a disinterested manner when obtaining the finance offers, which was a type of duty in law which would mean that they would be liable to the customers in the tort of bribery.
• In three of the four financings in the cases,⁷  the commissions the brokers received were secret, such that they constituted bribes.
• In the fourth case, that of Mr. Johnson, the commission was sufficiently disclosed, but (i) the commission still constituted an unlawful profit for the broker acting as a fiduciary, and (ii) the relationship was “unfair” within the meaning of s.140A of the CCA.

As such, the Court of Appeal granted relief in relation to each of the four financings which were at issue in the three cases.

The FCA extended its complaint moratorium to cover non-DCA claims as well.

CMCs

Since early 2024, claims management companies and law firms conducting claims management activity (here all referred to as “CMCs”) have been engaged by consumers to assist with their potential motor finance claims. CMCs have put complaints in to lenders on behalf of their customers, and in line with the moratorium, these have all been awaiting further action by the FCA and the courts to clarify the legal position of these complaints. CMCs have spent a significant amount of time and money advertising, as well as developing systems which could analyse and process large numbers of claims.

The Supreme Court Judgement

Unusually, the Supreme Court judgement in Johnson was handed down at 4:35 p.m. on a Friday after the close of markets for the week, at the request of the FCA and with the consent of the parties, noting that the judgement had the potential to have significant effects. The judgment dealt with the four non-DCA financings.

Whilst the issues of law around bribery and fiduciary duties are complex and involve a significant amount of case law, in some cases dating back hundreds of years, the Supreme Court’s decision and statement of the law on these points is relatively easily stated:

• The dealers had no fiduciary duty to the customers. The Court of Appeal had erred when it found that such a duty existed. Building on and refining earlier case law, the Supreme Court noted that the “existence, in a commercial context, of trust and confidence between parties to a transaction is not of itself sufficient for equity to impose fiduciary duties on one of the parties towards the other”.⁸  Further, the Supreme Court clarified that, “[a]s a general rule, outside well-established fiduciary relationships, such as company director, partner, or agent, in a commercial context it is normally inappropriate to expect a commercial party to subordinate its own interests to those of another commercial party”.⁹
• A tort of bribery did exist, but it only arose in circumstances where there was a fiduciary relationship, or at least where one party has a “fiduciary duty of loyalty to the other”.¹⁰  A “fiduciary duty of loyalty” is what the Supreme Court called the “duty to act disinterestedly”, and whilst the Supreme Court found that it could arise in circumstances where a full “fiduciary duty” did not subsist, it went beyond a “purely contractual duty to give disinterested advice”.¹¹  The Supreme Court found that it did not arise here.
• As such, the Supreme Court dismissed the claims which were based on bribery or breach of fiduciary duty.

As for the other cases, the “unlawful profit” claim in Mr. Johnson’s case fell away because there was no fiduciary duty on the part of the broker. The Supreme Court found, however, that the claim under section 140A of the CCA was successful.¹²  Section 140A CCA speaks in general concepts, such as the relationship being “unfair”, and instructs the court to “have regard to all matters it thinks relevant”.¹³  The Supreme Court summarised that the following, non-exhaustive list would “normally be relevant” in this context for determining if relief should be granted under this head, namely, the size of the commission relative to the charge for credit; the nature of the commission (because, for example, a discretionary commission may create incentives to charge a higher interest rate); the characteristics of the consumer; the extent and manner of the disclosure; and compliance with the regulatory rules.¹⁴

The Supreme Court found that the Court of Appeal had erred in its assessment of unfairness, including taking into account matters which were accepted to be a “coincidence” rather than substantive.¹⁵  As such, and in the interests of finality and giving some guidance on the application of section 140A CCA, the Supreme Court found relevant that:

• Mr. Johnson was “commercially unsophisticated”, and failed to read the documents. Whilst the deputy district judge at first instance had found that Mr. Johnson had “displayed an almost wilful disregard of the precontract information”, the Supreme Court found that, in the circumstances, “[i]t must be questionable to what extent a lender could reasonably expect a customer to have read and understood the detail of such documents”.¹⁶
• The size of the commission here was substantial, as it would constitute, as percentages, (i) 17.5% of the total amount Mr. Johnson was due to pay in total, (ii) 26% of the total advance of credit, (iii) 63% of the amount of all the interest due, and (iv) 55% of the total charge for credit (comprising interest and fees).¹⁷  The Supreme Court found that had Mr. Johnson read the documentation provided to him, “he would have been informed of the possibility that a commission might be payable to the broker”, and had “he decided to pursue the matter he was likely to have discovered the amount of commission”. However, in light of the Supreme Court’s findings that he was “commercially unsophisticated”, that these disclosures were given “no prominence” and not drawn attention to, and a customer would “not expect that a commission of this size would be payable”, the Supreme Court treated this as at least insufficiently disclosed,¹⁸  and elsewhere referred to it as “undisclosed commission”.¹⁹
• There was a commercial tie between the broker and the lender, which was not disclosed to Mr. Johnson. The Supreme Court noted that Mr. Johnson had been given a “suitability document” prior to entering into the finance agreement, which stated, amongst other things, that they offered products from a “select panel of lenders”, but at the same time the broker’s agreement with First Rand required the broker to introduce customers to First Rand first before any other lenders.²⁰  The Supreme Court found that “there was nothing in the documentation which could have alerted Mr. Johnson to the true position”, and indeed left him with a “false impression”,²¹  and so could not have been adequately disclosed.

In all these circumstances, the Supreme Court found that the relationship in Mr. Johnson’s case had been unfair, and that the lender should therefore pay the commission to him (in this case, £1,650.95, plus interest) in recompense.

The FCA’s Consultation on a Consumer Redress Scheme

The FCA has announced that it will consult on a consumer redress scheme in October 2025, and that the consultation period will be open for six weeks, ready to be operational in 2026.²²  It has announced, at the same time, that it will consult on further extending the moratorium already in place to align with the timetable for redress payments.

Whilst we may expect that there will be further announcements after the Court of Appeal hears the judicial review in September 2025, for the time being the FCA appears to be basing its theory of the case firmly on breaches of section 140A CCA, and not (at this stage) the broader bases on which the FOS founded its awards (such as breaches of the Principles).

Whilst the FCA is careful to say that it is still considering what the consultation paper will look like, at present, the proposal can be summarised as follows:

• It will cover DCAs “if they were not properly disclosed”, with the implication being that the FCA believes that all DCAs could be unfair if not properly disclosed. It is not yet clear what the FCA means by “not properly disclosed”, and the definition the FCA ultimately decides on could limit the number of claims significantly.
• It may cover other claims which are similar to Mr. Johnson’s, namely “high and undisclosed commission cases”. In Mr. Johnson’s case, the commission was deemed too high to be fair when it was 55% of the total cost of credit, and the FCA has said that it will need to determine what the relevant cutoff figure would need to be.
• The FCA says that all in-scope agreements back to 2007, should be included in the redress scheme, to be “consistent with the complaints the [FOS] can consider and to ensure the scheme is comprehensive”.²³  Whilst the FCA’s desire to ensure uniformity across all potential claims is understandable, there are likely a number of difficulties inherent to including such old claims, not least the availability of documentation.
• The FCA has noted that the Supreme Court chose the commission paid to the dealer as the correct remedy in Mr. Johnson’s case. The FCA has said, however, that they will consider this option for quantum “alongside alternative approaches”, albeit that it is “unlikely any alternative would lead to higher remedies overall”. The commission figure might therefore be assumed to be the maximum likely to be required, plus simple interest at approximately 3% per annum.
• There is also a statement by the FCA that they expect that “most individuals will probably receive less than £950 in compensation”, and that they will consider whether there should be a de minimis threshold to be eligible for a payout. Given that Mr. Johnson received £1,650, this might be thought surprising, but it should be recalled that the premise of that case was that the commission was very high.

One significant issue which the FCA has not given an indication on, however, is whether the redress scheme will operate on an opt-in or opt-out basis, as discussed in the next section. The FCA has noted that, from its perspective, there are benefits and disadvantages to each.

What do the Supreme Court Judgment and FCA Consultation Mean for CMCs?

All Claims

The fact that the FCA has yet to decide whether this would be an opt-in or opt-out scheme, leaves a number of open questions for CMCs. Insofar as there is an opt-in scheme, CMCs may find (for example) advertising and recruiting customers much easier, even despite the statements from the FCA and the Solicitors Regulation Authority (SRA) that individuals do not need to use CMCs to make claims, and the FCA requirement that CMCs notify consumers of the same.²⁴  If there is an opt-out scheme, CMCs should be very conscious of the manner in which it is structured, to ensure that their agreements with their customers remain valid and enforceable.

The recent joint statement by the SRA and the FCA about “poor practices in motor finance commission claims” should also be of some concern to CMCs.²⁵  On the one hand, as a general matter, because the regulators are indicating their interest in this subject, and drawing attention to the fact that they are bringing investigations and potentially enforcement actions against firms - indeed, the SRA says that it has 89 live investigations open into 73 law firms. Secondly, as a specific matter, since the regulators are also stating that, before entering any agreement with a customer, a CMC must inform the customer of their right to terminate, and that any charge for this must be “fair and reasonable”.

CMCs should be aware of their regulatory obligations for customers who have already signed up with them. It seems likely that the recent updates will mean that firms have to do a reasonable amount of work to determine if a claim is meritorious or not than perhaps had first been thought. Given that at the same time the FCA is indicating that the amounts people may receive are likely to be less than £950, CMCs need to be alive to the economics of their positions.

Non-DCAs

For CMCs that are dealing with non-DCA claims, each such claim will need to be reviewed on the basis of the Supreme Court’s decision in Johnson. As the Supreme Court said in Plevin, section 140A is “deliberately framed in wide terms with very little in the way of guidance about the criteria for its application”,²⁶  and even with the gloss given in Johnson, it may be difficult for firms to be very confident that a particular claim will be successful unless it is very close in facts to Mr. Johnson’s. Claims involving “high commission”, unsophisticated borrowers and ‘tied arrangements’, such as First Rand had with the dealer, would then become very important to assess, along with what was exactly disclosed in each case.

This leaves a number of difficulties for CMCs. First, what will constitute “high commission” is not yet clear, even if at least 55% of the total cost of credit would seem to be caught. Similarly, what will constitute adequate disclosure is not clear, particularly since the Supreme Court’s judgment indicates that this has to be assessed in light of the sophistication of the borrower. The industry will hope the FCA provides clear guidance on these points.

DCAs

Given that Johnson did not explicitly deal with DCAs, there was a view that Johnson’s effect on DCA claims was likely to be very limited. The FCA’s announcement, however, has an important caveat in this regard: whereas for the FOS-type claims (arguably), any form of DCA was automatically redressable, the FCA is only proposing that there should be redress for DCAs which were “not properly disclosed”. As for non-DCAs, what “not properly disclosed” means is potentially difficult, given that (under Johnson) it is potentially sensitive to the sophistication of the claimant and the factors highlighted by the Supreme Court refer only generally to the “extent and manner” of disclosure.

CMCs will therefore have to consider, in each case, not just whether a particular claimant’s case involved a DCA, but also whether it was appropriately disclosed. CMCs may also need to consider whether there are any other indicia from the Supreme Court’s non-exhaustive list of potentially relevant factors in each particular case,²⁷  which would suggest that a payout should be made - for example, if a DCA case also involves a very high commission or a ‘tied arrangement’ between the dealer and lender.

Next Steps

• This judgment and the FCA’s immediate response will be read closely by CMCs and their funders to understand the implications on their business models.
• CMCs will need to consider whether the claims they are managing remain valid and viable following the judgment of the Supreme Court. This will particularly be the case if they are managing any claims involving non-DCA cases.
• CMCs will also be well-advised to read the FCA’s statement closely, and consider the effect of the potential limitation that even for DCA claims, it will only be where there was inadequate disclosure in which redress would be paid out. Firms may need to reassess their views of each case.
• As noted above, in September 2025, the Court of Appeal will hear an appeal of a judicial review challenging the FOS’s decisions to uphold complaints by consumers against lenders, which were granted on a broader basis than the Supreme Court has viewed the case and, in a way, which the FCA now does not appear to follow. It is not yet clear how this case will affect the scope of claims available to consumers or how the FOS’s jurisdiction will interact with the FCA’s proposed redress scheme. The Court of Appeal’s judgment will need to be considered carefully as a result.
• The FCA’s consultation paper is expected in October with a relatively short 6-week consultation period. CMCs are likely to want to read this very closely - as will all other interested parties - to consider how they would want to respond, as some significant issues remain and questions about the FCA’s ultimate approach are yet unanswered.

^{1 Johnson v. First Rand Bank Limited (London Branch) t/a MotoNovo Finance, Hopcraft and another v. Close Brothers Limited, and Wrench v. First Rand Bank Limited (London Branch) t/a MotoNovo Finance [2025] UKSC 33, https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf (“Johnson UKSC”).}

^{2 https://www.legislation.gov.uk/ukpga/1974/39/section/140A.}

^{3 https://caselaw.nationalarchives.gov.uk/ewhc/admin/2024/3237.}

^{4 This case was listed for hearing in early July 2025, but at the hearing the Court of Appeal put the case back until September, pending the decision of the Supreme Court in Johnson.}

^{5 https://www.bailii.org/ew/cases/EWCA/Civ/2024/1282.html.}

^{6 Mr. Johnson’s claim, it appears, was close to being a DCA, since the broker had had the authority to vary the interest rate and receive a higher commission; on the facts, however, the finance agreement Mr. Johnson entered into was at the minimum rate.}

^{7 Mr. Wrench had two relevant financings involved in the appeal.}

^{8 Johnson UKSC, para 97.}

^{9 Ibid, para 110, quotation marks and citation omitted.}

^{10 Ibid, para 199.}

^{11 Ibid, para 201.}

^{12 Section 140A CCA permits a court to provide a remedy under section 140B if the relationship between the creditor and the debtor is unfair because of (a) any of the terms of the agreement or a related agreement, (b) the way in which the creditor has exercised or enforced any rights under the agreement or a related agreement, or (c) any other thing done (or not done) by, or on behalf of the creditor (either before or after the making of the agreement or any related agreement).}

^{13 Section 140A(2) CCA.}

^{14 Johnson UKSC, para 319.}

^{15 Ibid, para 312.}

^{16 Ibid, para 336.}

^{17 This is a similar type of analysis to how the Supreme Court dealt with the Plevin v. Paragon Personal Finance Limited [2014] UKSC 16, which was a case in relation to section 140A and Payment Protection Insurance (PPI) commissions; however, the Supreme Court, in Johnson, has cautioned that there would not be a direct read-across, as the cases were concerned with “different products on different markets”: Johnson UKSC, para 326.}

^{18 Johnson UKSC, para 336.}

^{19 Ibid, para 327.}

^{20 Ibid, paras 330 to 335.}

^{21 Ibid, para 336.}

^{22 https://www.fca.org.uk/news/statements/fca-consult-compensation-scheme-motor-finance-customers.}

^{23 https://www.fca.org.uk/news/statements/fca-consult-compensation-scheme-motor-finance-customers.}

^{24 https://www.sra.org.uk/sra/news/press/car-finance-warning-july-2025/.}

^{25 https://www.sra.org.uk/sra/news/press/car-finance-warning-july-2025/.}

^{26 https://supremecourt.uk/uploads/uksc_2014_0037_judgment_fdd9b1ec26.pdf, paragraph 10.}

^{27 As noted above, the Supreme Court gave the following non-exhaustive list of things which would “normally be relevant” for determining if there was an “unfair relationship” under section 140A CCA, namely, the size of the commission relative to the charge for credit; the nature of the commission (because, for example, a discretionary commission may create incentives to charge a higher interest rate); the characteristics of the consumer; the extent and manner of the disclosure; and compliance with the regulatory rules.}

^{Note, in addition, that given that this is a non-exhaustive list, other unusual circumstances may also be appropriate to be considered.}