Finance commissions: Key takeaways from the Supreme Court hearing
Last October, the Court of Appeal ruled that dealers and brokers must provide clear disclosure of commissions to customers before finalising finance agreements. This ruling led to an appeal to the Supreme Court. Over the course of three days between April 1st and 3rd, the Supreme Court held a hearing where the appellant lender banks (FirstRand Bank and Close Brothers) and the respondents (customers Johnson, Wrench, and Hopcraft), alongside FCA and NFDA, laid out their arguments.
The structured approach of this hearing ensured that all parties had the opportunity to present their arguments and that the Supreme Court received comprehensive input from all stakeholders involved. All the positions were very well argued, and the Supreme Court is in a challenging spot, so it is hard to anticipate an outcome.
What’s next for the industry?
The Supreme Court ruling is expected in July, with no final date set yet. The outcome of this ruling might reshape the current regulatory requirements. The case remains pivotal in defining transparency and fairness in motor finance.
We’ll continue to provide updates as the ruling approaches.
In the meantime, Jo Davis, CEO of Auxillias Limited, has provided a summary of the hearing, which you can read below.
What are the agreed issues?
At the highest level, the Court is seeking to determine a number of agreed issues:
When acting as credit brokers, do car dealers owe consumers a “disinterested” and/or fiduciary duty to provide information, advice, or recommendations?
If so, were the payments of commissions by the lenders to the car dealers secret such that the lenders become primary wrongdoers?
Can the lenders be liable in the tort of bribery? If so, what is the correct approach to remedies?
If there was sufficient disclosure of the commission to negate secrecy, was there insufficient disclosure to procure the consumers’ fully informed consent to the payment such that the lenders are liable as accessories for procuring the credit brokers’ breach of duty?
Can insufficient disclosure also suffice to make the relationship between lender and consumer “unfair” for the purposes of the Consumer Credit Act?
The Lenders’ argument
Counsel for the lenders advanced a firm stance that motor dealers did not owe fiduciary or "disinterested" duties to consumers when arranging finance. They emphasised that such duties require an undertaking of "single-minded loyalty," absent in motor finance scenarios where consumers paid no direct brokerage fee and given the dealer’s obvious interest in the car and finance transactions.
They also argued strongly for abolishing the common law tort of bribery, asserting it lacked proper historical foundations and was better addressed through equitable remedies. They argued that the law had taken a “wrong turn” and that where the existence of commission or the possibility of it is disclosed, this should not be treated as involving bribery, since secrecy—not payment—is the central wrong.
Regarding unfair relationships, the Appellants rejected comparisons with the Plevin PPI case, asserting motor finance commissions did not obscure true costs or unfairly inflate prices, since consumers could evaluate finance offers transparently based on clearly stated interest rates and APR.
The Respondents’ argument
Counsel for the consumers defended the common law tort of bribery, highlighting its deterrent effect and essential protection against corruption and basically said the court should uphold the current law not to interfere with it, and focus on the cases in front of it (not be swayed by possible wider ramifications). Commissions inadequately disclosed, even if technically noted, remained effectively secret and thus constituted bribery. They argued that the Tort of Bribery is concerned with addressing the risk created by a conflict of interest, not the action or harm (a payment) arising from it.
They insisted that dealers owed consumers at least a common law "disinterested" duty, if not full fiduciary duties, because consumers relied on dealers to secure competitive finance deals. Consumers, lacking financial sophistication, entrusted dealers with their financial information, creating an implied duty of impartiality.
Finally, they argued the Plevin unfairness principle applied directly, asserting high undisclosed commissions created inherently unfair relationships, preventing consumers from making genuinely informed financial choices. They went as far as to suggest that the level of possible remediation shows just how “dysfunctional” the market is.
FCA’s intervention
The FCA opened by explaining its attendance is to assist the court and provide regulatory context, particularly due to the significant potential impact of the decision on the motor finance market. It outlined the market impact in that the case involves a massive £40 billion motor finance market and that there are hundreds of thousands of related claims both in court and with the Financial Ombudsman Service (FOS), making case management a major challenge.
The FCA then set out the regulatory background & actions completed to date such as the 2021 review that that led to changes in CONC rules on commission disclosure, the appointment of a skilled person in 2024, the extension imposed beyond discretionary commission arrangements (DCAs) and the pausing the 8-week complaint response deadline to 4 December 2025.
The FCA then explained the Potential Redress Scheme and that whilst it had not made a final decision, it planned to consult on a s.404 redress scheme within six weeks of the Supreme Court judgement if consumers are found to have lost out.
In relation to the current market structure and legal points they:
Acknowledged the role of motor dealers and intermediaries, referencing updated FCA rules and frameworks.
Highlighted that old OFT guidance is outdated and only applies in limited circumstances (e.g., Hopcraft).
Emphasised a well-balanced regulatory framework that supports transparency and fairness (e.g., Principle 8).
Opposed the idea that motor dealers owe fiduciary duties; this would be inconsistent with existing law.
Expressed concern about broadly applying the tort of bribery to agency relationships, emphasising the need for an "impartial and disinterested" duty—not necessarily fiduciary.
Urged the court to find a middle ground, warning against abolishing the tort of bribery entirely.
The FCA made a call for certainty and requested a swift decision from the court to provide legal certainty and noted the upcoming Court of Appeal case (Clydesdale, 1–3 July) that, along with the Supreme Court judgement, will inform the FCA’s next steps.
The FCA concluded with a view on fairness and commission and invited the court to provide clarity on a number of issues as applied to “motor finance” namely:
Supported retaining the unfair relationships regime as a fact-sensitive, case-by-case test.
Discretionary commission models (banned in 2021) are more likely to cause unfairness than fixed commission models.
Argued that Plevin (a key case in PPI mis-selling) should not be directly applied to motor finance due to differences in payment structures and commission sizes.
Suggested the key metric was assessing the amount of commission against the total charge for credit.
Overall, the FCA was trying to tread a middle ground, between the appellants arguments and those of the respondents. Damage limitation without completely dismantling its own work.
FCA’s full written submission is available here.
NFDA’s intervention
Alongside FCA, the NFDA applied to intervene in the Supreme Court hearing to ensure that its dealer members were represented and had their voices heard in this pivotal case. The NFDA addressed three topics during its session:
The commercial role of car dealers in finance sales,
Fiduciary duty tests for retailers as intermediaries,
The implications of equating credit broking with fiduciary responsibility.
Paul Bentley, ex-Looker’s Group Operations Director and Automotive Consultant works with the NFDA as the F&I Advisor and is supporting the NFDA’s submission, quoted:
“We believed the Court of Appeal's previous judgement made an error in deriving a fiduciary duty from the nature of credit broking. To that extent, we felt there had been a leap in the law between paid advisors and retailers whose primary objective is to sell cars. The danger of allowing the law to develop in leaps and bounds rather than incrementally is that inevitably gives rise to significant uncertainty and instability.”
In a court hearing, the NFDA firmly denied claims that its members accepted bribes through commissions from lenders.
The case questioned whether dealers have a fiduciary duty—meaning, whether they must act only in the best interests of their customers. The NFDA argued that customers don’t expect this kind of duty from dealers.
“Car dealers are commercial entities acting quite properly in their own interest, a fact well-understood by customers. Customers do not expect car dealers to provide impartial financial advice. Customers visit dealerships to purchase cars and related products like finance, additional products, or maintenance plans, all seen as part of a commercial transaction.”
The NFDA argued that arranging finance is a commercial activity. Dealers introduce customers to lenders, share information, and handle agreements under consumer credit laws. This is common in UK retail and different from fee-based financial advice.
They also noted that finance and car sales go hand-in-hand. Many customers focus on monthly payments rather than the full car price and often discuss finance before picking a car. This viewpoint is also backed up by Auto Trader’s own consumer research, whereby 55% work out their affordability options prior to visiting a retailer.
NFDA’s full written submission is available here: Submission
Glossary of terms
Fiduciary duty - In this case, the judgment was that the dealer acting as a credit broker had a ‘fiduciary duty’ to the customer. This means the broker had a legal responsibility to act unselfishly in the best interests of their customer. A person with a fiduciary duty is not permitted to use their position for their own private advantage.
Disinterested duty – The judgment also stated that dealers as brokers also have a ‘disinterested duty’ to give advice, recommendation, or information on an impartial basis to their customers. This means that the dealer has a duty to be impartial and unbiased in how they provide information and advice regarding the selling of finance products.
Secret commission - A secret commission is a commission being paid by a lender or broker as a financial incentive for arranging their finance product, but the customer has not been made aware that any commission will be paid.
Half secret commission -If the principal (consumer) was aware of the existence of the commission but not of the amount, such payments may be classed as 'half secret commission'.
Useful Resources:
FCA’s full written submission is available here.
NFDA’s full written submission is available here: Submission
You can contact Jo Davis here and find out more about Auxillias here.
You can contact Paul Bentley here.