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On 1 August 2025, the UK Supreme Court handed down along-awaited ruling relating to discretionary commission arrangements in car finance agreements - and the outcome is a significant step forward for consumers.
The ruling confirms that, in certain circumstances, hidden commissions paid by lenders to car dealerships can create an unfair relationship under the Consumer Credit Act 1974 - opening the door for many consumers to reclaim money they were never told they were paying.
The Case: Johnson, Hopcraft & Wrench v FirstRand& Close Brothers
The judgment centred on three claims brought by consumers who had entered into PCP (Personal Contract Purchase) agreements. In one of the cases, the Supreme Court found that the customer had been subject to an unfair contractual relationship due to the size and secrecy of the commission paid by the lender to the dealer.
The Court ruled that:
- While commissions themselves are not unlawful, the way they are paid and whether they are disclosed to customers is crucial.
- In this case, the commission was excessive, undisclosed, and the fact that the commercial relationship between the bank and the dealership was concealed also.
Why This Matters
This is the most significant ruling to date on the car finance mis-selling scandal, which has seen millions of customers unknowingly paying inflated costs due to secret commissions built into their agreements.
The decision provides clarity after years of legal uncertainty and strengthens the legal foundation for many ongoing and future claims. It confirms that customers may be entitled to compensation if their agreement is adjudged to be unfair.
Two Other Arguments Rejected
The Supreme Court dismissed two other claims that relied on different legal routes -namely bribery and breach of fiduciary duty. While this narrows the scope of legal strategies available, it provides welcome clarity on which types of claims are most likely to succeed.
FCA Response: A Redress Scheme in Sight
In response to the ruling, the Financial Conduct Authority(FCA) announced on 3 August that it will consult on a formal redress scheme for affected consumers.
Early estimates suggest that up to 10 million UK drivers could be eligible for some form of compensation, with industry liabilities projected in the region of £9–18 billion - a figure lower than initial estimates, which ranged as high as £40 billion.
What Happens Next?
The FCA is expected to launch its public consultation by the end of 2025, with a redress scheme potentially rolled out in 2026.
While this may streamline the process for many claimants, past redress programmes have shown that lenders do not always pay full compensation unless challenged. Legal representation may still be key to securing a fair outcome.
Our View
At Johnson Law Group, we welcome the Supreme Court’s decision, with the ruling reinforcing the principle that transparency matters, and that financial agreements must be free from hidden incentives that harm the customer.
We believe this judgment will pave the way for many valid claims to succeed - both through the courts and via the forthcoming redress scheme. However, each case remains fact-specific, and not all commission payments will qualify for compensation.
If you believe you may have been affected by hidden or excessive commissions in your car finance agreement, you can learn more about your options here.
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