On Friday 1st August 2025, the Supreme Court largely overturned the October 2024 Court of Appeal ruling that if car finance agreements did not tell their customers all details of commission, they were unlawful. Their case dealt with 3 related claims, where they ruled in favour of the lender for two claims, and in favour of the customer for the third.
Supreme Court Decision
The Supreme Court case dealt with three claims from those who had bought second-hand cars through finance agreements with car dealers. As part of their decision, they ruled that while car dealers do need to act fairly towards consumers, they do not have to only act in their customers’ best interests when arranging finance agreements. The Court also rejected the claim that finance companies had bribed the car dealers.
However, in the case of Johnson v Motonovo, the complaint was upheld, with the relationship between lender and customer being ruled as unfair. In this case, the commission was 55% of the total charge for credit and the exact nature of the commission, and the relationship between dealer and lender, had been disguised. They stated:
“It must be questionable to what extent a lender could reasonably expect a customer to have read and understood the detail of such documents.”
They also pointed out that no particular attention was drawn this commission in the documents signed by the consumer, and that “A customer would not expect that a commission of this size would be payable” and so it should have been displayed more prominently to ensure it was seen by them.
Redress Scheme
“On Friday the Supreme Court ruled that in many cases commission payments could be legal, but a lender did act unfairly – and therefore unlawfully – due in part to the size of the commission it paid to the motor dealer and how it was disclosed.
The Supreme Court agreed with several factors we had identified which could point towards an unfair relationship and fall foul of the Consumer Credit Act (CCA), whilst recognising it depends on the facts of each case […] This clarity helps us because we have been looking at what is unfair and, prior to this judgment, there were different interpretations of the law coming from different courts.
We will now consult on a redress scheme. Redress would depend on non-disclosure of the factors above and the interaction between them.” – The Financial Conduct Authority (FCA)
The FCA have stated that they will publish their consultation on what a redress scheme would cover and how it should be run by October 2025. Their consultation will run for 6 weeks with a view to launching this redress scheme with those affected beginning to get payouts by 2026.
Firms do not have to provide a final response to relevant motor finance complaints until 4th December 2025, though this deadline may be extended further following FCA consultation. The FCA have advised that those who have already complained do not need to take any action, and that consumers who believe they were not told about commission and believe they may have paid too much for their car finance should complain now. You can find out more about the redress scheme here.