Landmark UK Supreme Court Ruling on Car Finance Commissions

On August 1, 2025, the UK Supreme Court delivered a significant ruling regarding car
finance commissions that could have far-reaching implications for both consumers and
lenders. The case revolved around whether it was legal for car dealers to receive
commissions from lenders without informing customers, potentially paving the way for
consumer claims totalling billions of pounds.

Background of the Case

The Supreme Court reviewed decisions from previous courts concerning three key cases
involving lenders—FirstRand (trading as MotoNovo) and Close Brothers. The central issue
was whether consumers were adequately informed about the commissions paid to dealers,
which could affect the terms of their financing agreements. The Court of Appeal had
previously ruled that failing to disclose these commissions breached consumer trust, leading
to various consumer complaints.

Implications of the Ruling

The implications of this ruling are profound:

• Consumer Compensation:

  If the ruling upholds the previous court’s findings,
  lenders could be facing tens of billions in compensation claims from customers who
  were unaware of the commissions, similar to the mis-selling of payment protection
  insurance, which cost banks an estimated £40 billion.

• Transparency in Lending:

  The case emphasises the need for greater transparency
  in financial transactions involving consumers. With reports indicating that a
  substantial percentage of customers felt misled about their financing deals, the
  Supreme Court’s ruling aims to protect consumers moving forward.

Industry Reactions

Financial institutions, including major players like Lloyds Banking Group and Barclays, had
already reserved substantial funds in anticipation of potential payouts. Lloyds set aside £1.2
billion, reflecting the severity of the expected financial impact. Analysts predict that the
industry costs could potentially reach as high as £30 billion if general consumer rights are
extended.

In response to the ruling, the Financial Conduct Authority (FCA) indicated plans to evaluate
a compensation scheme for affected customers. This marks a critical step towards restoring
trust in the auto finance sector, following the shadow cast by previous mis-selling scandals.

Consumer Perspective

Consumer advocacy groups have welcomed the ruling, highlighting that millions of motorists
trusted their dealers to provide them with fair financing options. The lack of transparency in
commission payments creates conflicts of interest and undermines consumer confidence. As
noted by consumer advocates, many buyers might have opted for different finance offers
had they known the true nature of the commissions involved.

Conclusion

The UK Supreme Court’s ruling on car finance commissions is a landmark decision that
seeks to enhance transparency and protect consumers in the automotive finance market. As
the industry adapts to these changes, the focus will likely remain on ensuring that

Consumers are informed and treated fairly in their financial relationships. This development not only has immediate implications for lenders but also sets a precedent for future practices
across the financial sector.