In the conjoined appeals of Hopcraft, Johnson and Wrench ([2025] UKSC 33), the UK Supreme Court (UKSC) examined three claims by claimants who purchased cars using motor finance against their lenders.1 While two of the three CCA claims had fallen away, the claimants were broadly successful at the Court of Appeal in a judgment which appeared to expand significantly the duties owed by brokers and lenders to their customers.
The claimants case was that lenders’ payments of commissions, which had either not been disclosed to the customers or had not been fully disclosed, to dealers entitled the claimants to relief in the form of damages or rescission or both on three grounds:
(i) in relation to fully secret payments, that payment of commission amounted to common law bribery;
(ii) for partially disclosed commissions, that the brokers owed the customers a fiduciary duty to the claimant and the payment of commission amounted to dishonest assistance in the dealers’ breach of fiduciary duty; and
(iii) in relation to one of the claimants, that the relationship between the lender and the claimant was ‘unfair’ under the Consumer Credit Act 1974 (CCA).
The recent UKSC judgment largely overturned the Court of Appeal’s decision, with only a claim under the CCA succeeding (brought by a single claimant, Mr Johnson) on the grounds that there was an unfair relationship. The Financial Conduct Authority (FCA) has subsequently announced its intention to consult, by early October, on an industry-wide redress scheme covering motor-finance agreements entered into since 2007.2
Although it is clear that the potential liability for lenders and brokers is far less than might have been the case had the UKSC upheld the Court of Appeal decision, the full extent of their exposure will not be known until the final details of the FCA’s redress scheme have been confirmed.
This alert summarises those developments and flags practical considerations for lenders, funders, and other market participants. It is important to note that exposure is not necessarily confined to originating lenders or brokers, with many motor-finance receivables sold into asset-backed securitisation vehicles, syndicated facilities, or whole-loan sales. Many of the originating lenders will continue to be involved in these structures as asset servicers and/or risk retention investors and so may face claims and potentially suffer financial losses – directly or indirectly.
In addition, SPVs, third party asset servicers and other service providers, noteholders, warehouse funders and other secondary investors in motor-finance debt may also face such claims, be subject to obligations under transaction documents and/or suffer losses depending on: (i) whether legal title or only economic interest transferred, (ii) scope of transaction covenant responsibility and contractual allocation of risk; (iii) servicing arrangements and associated regulatory responsibility; (iv) the scope of any issuer substitution or indemnity provisions; and (v) the extent, if any, to which the FCA uses its rule-making powers to impose obligations on current transaction parties and investors rather than original financiers.
Given the remaining uncertainty around the final outcome of this process, and the fact-sensitive nature of the UKSC’s analysis, firms should treat all commentary below as indicative only and continue to monitor FCA communications, industry data-gathering exercises and emerging claimant strategies.
Supreme Court: key findings
No fiduciary duty in the typical dealer-finance relationship
The UKSC stressed that every participant – be it dealer, lender or customer in the sale and purchase of a motor vehicle – is acting at arm’s length and pursuing their own commercial objectives. As the dealer remains interested in selling the car, the court held that dealers do not ordinarily undertake the “single-minded loyalty” necessary to create fiduciary duties when sourcing finance for customers (at [283] of the UKSC judgment). Absent a fiduciary duty, there can be no claim in bribery or dishonest assistance.
According to the UKSC, the analysis in Wood was incorrect insofar that the decision of Wood has been understood to imply that “a purely contractual duty […] to give disinterested advice is sufficient in itself to engage the law of bribery” (at [204]). Rather, a fiduciary duty is necessary to engage the law of bribery, not a lesser, ‘disinterested duty’.3 A clear distinction remains between a disinterested duty and a fiduciary one; ordinarily a contractual duty (or, a duty in tort or public law) that gives rise to disinterest should not give rise to a fiduciary duty.
Regulation shapes, but does not replace, common law
The court treated the FCA’s Consumer Credit Sourcebook (CONC) rules and the 14-day cooling-off period as an important backdrop, suggesting that Parliament did not expect dealers to be fiduciaries. Section 56 of the CCA, which deems a dealer to be an agent for the lender during pre-contract talks, further reinforced that analysis.
Disclosure
On the facts, none of the three customers received full disclosure of the commissions. However, as the fiduciary duty and the lesser, ‘disinterested duty’ were not made out, the absence of full disclosure did not automatically trigger common-law or equitable remedies.
The UKSC clarified the position on disclosure itself: given that any consent given must be fully informed, there is no such thing as a partial disclosure, thus rejecting the notion of a “half-way house” (at [219]) said to arise from Hurstanger.4 According to the UKSC, the reasoning in Hurstanger on partially disclosed commissions is “based on a misunderstanding” (at [226]) of the extent of disclosure required to negate a breach of fiduciary duty. Rather, “what is required is full disclosure of all material facts” (again, at [226]). Which facts are material depends on the circumstances of each case.
Failure to disclose material facts became significant in the case of Mr Johnson, where the relationship between the customer and the dealer was deemed unfair because (among other reasons) the dealer had not disclosed material facts.
CCA unfair relationship analysis is highly fact-specific
Under section 140A of the CCA, courts may find that a relationship between a lender and a borrower is unfair based on the terms of the agreement, the way in which the creditor exercises their rights or “any other thing done (or not done) by, or on behalf of, the creditor” (at [294]). This is a highly fact-specific exercise. Mr Johnson pleaded that various failures to disclose information on the existence and extent of the commission, and on the relationship between the dealer and lender, had rendered the relationship unfair.
The UKSC found that the relationship between Mr Johnson and his lender was unfair under section 140A of the CCA. It based this finding on:
(i) the large commission paid by the lender to the dealer, equating to approximately 25% of the advance and 55% of the total charge for credit;
(ii) sales documentation that incorrectly stated that the dealer offered sales “from a select panel of lenders” when in fact the dealer had a contractual tie obliging them to offer first refusal of any business to a specific lender (at [331]-[333]); and
(iii) concealment of that contractual tie (albeit it was accepted that Mr Johnson had not read the relevant paperwork and probably would not have understood it even if he had).
It is noteworthy that non-disclosure of the amount of commission was not, by itself, enough to establish an unfair relationship, though it could be a breach of the CONC rules.
The UKSC approved (at [319]) the FCA’s submission of a non-exhaustive list of factors that could point towards an unfair relationship:
(i) the size of the commission relative to the overall charge for credit and also to the overall cost of the car;
(ii) the nature of the commission, for example, whether it is discretionary;
(iii) the characteristics of the consumer;
(iv) compliance with regulatory rules; and
(v) the extent and manner of disclosure.
Therefore, non-disclosure of commission amounts is only one factor to be considered in a wider array of factors as part of a holistic balancing exercise as to unfairness.
Mr Johnson’s failure to read the paperwork (which disclosed the existence, but not the amount, of commission payable to the dealer) weighed against him, but the court held that his being an unsophisticated borrower counterbalanced this. It also noted that the contractual tie to the lender was not disclosed at all and there was a deliberate misrepresentation designed to mislead the customer.
The court ordered the finance company to pay Mr Johnson an amount equal to the commission, plus interest at a commercial rate from the date of the agreement, but declined to disturb the underlying loan balance.
FCA statement of 3 August 2025
Scope
The FCA proposes that the new redress scheme will cover two types of motor finance:
- discretionary commission arrangements (DCAs), which were banned by it in 2021 and did not form part of the UKSC case; and
- non-DCAs, insofar as the relationship concerned is unfair under the CCA and/or in breach of CONC rules.
Timeframe covered
The FCA intends to consult on a scheme covering agreements from 2007 onwards, to ensure consistency with the Financial Ombudsman’s power of review. The FCA acknowledges that claims time-barred in court proceedings cannot be included, so some pre-2014 agreements may fall away unless the limitation period was suspended by concealment.
Redress methodology
The UKSC ordered that Mr Johnson’s lender reimburse him the entirety of the commission plus interest it had paid to the dealer. The FCA will also need to “consider alternative approaches”.5 Early indications suggest that any scheme may apply a lower figure, calibrated to the degree of consumer harm, market impact and operational feasibility. The specific interest rate to be applied remains open for consultation.
Quantum range
According to the FCA, the total cost of the redress scheme will unlikely be materially lower than £9 billion, with extreme predictions reaching up to £18 billion. This includes administrative costs, but the figure is highly contingent on eventual scheme design (e.g., opt-in versus opt-out, de minimis thresholds, interest rates, etc.) and on the treatment of non-DCAs.
Timetable
Consultation is scheduled to begin by early October and will likely run for six weeks. Payments could then commence in 2026. The FCA will continue parallel supervisory and enforcement work and has warned claims management companies and law firms – while reassuring customers – that paid representation will not be required to benefit from the scheme.
Immediate questions for lenders
Liability and quantum under the CCA
Lenders may need to perform a transaction-by-transaction review focusing on:
(i) the clarity, timing, and prominence of disclosure;
(ii) commission size relative to the cost of credit;
(iii) the nature of any lender-dealer tie; and
(iv) compliance with the the FCA’s CONC rules.
While the undisclosed commission in Mr Johnson’s case – being 55% – was treated as “so high” and “a powerful indication that the relationship […] was unfair” (at [327]), the UKSC declined to set a clear threshold for unfairness. Borrower sophistication and conduct (e.g., failure to read documents) can mitigate but are not determinative.
Potential recovery from dealers
Contractual indemnities, guarantees or warranties in dealer agreements may be triggered, but recoverability will depend on drafting and limitation. Claims in negligence or for contribution could face causation and limitation hurdles, especially where disclosure failures were primarily documentary. Lenders should map their surviving dealer populations and review contractual protections early.
Making provisions
Lenders are encouraged to (re)calculate provisioning on a probability basis that reflects a range of plausible iterations of an FCA redress scheme as well as potential litigation outside any eventual scheme. This may also involve reviewing existing securitisation documentation to confirm whether indemnity or repurchase triggers could shift redress costs back to the originators of loans.
Interplay between an FCA redress scheme and civil claims
Redress scheme versus litigation
The FCA’s goal is a comprehensive solution. However, unless an opt-out scheme is established and given statutory underpinning, borrowers might still be able to pursue CCA claims in the courts if they believe scheme compensation is inadequate, thought the courts are likely to use the CPR to get the cases back into the redress scheme. Any redress scheme is likely to ensure contractually that the parties agree to be bound by the outcome of the scheme. If any compensation is recovered in the redress, it will likely be very hard for the customer to claim for more, though there may be test cases on the quantification methodology.
Test for unfairness
The FCA has indicated that it will need to formulate a practicable standard. Whether the UKSC’s fact-based approach (e.g., commission size, lender-dealer tie, misleading documents, etc.) becomes the default remains to be seen. The FCA will need to balance certainty and simplicity with fairness when/if deciding to impose a de minimis threshold for unfairness.
Overlap with the Financial Ombudsman Service
Complaints already lodged with the Financial Ombudsman Service may be paused or redirected once the scheme parameters are clearer.
Possible parallels with PPI
While some commentators view the potential redress quantum and long tail of complaints as reminiscent of the payment protection insurance (PPI) scandal, there are material differences:
(i) PPI remediation was driven largely by non-disclosure of premium breakdown; motor-finance claims turn on context-specific findings of unfairness.
(ii) The UKSC made the point that PPI was not key to the transaction for the consumer whereas finance was to the buyer.
(iii) The FCA’s early engagement and stated intention to “ensure a healthy, functioning motor-finance market” may signal a more contained and structured approach than the decade-long PPI programme.6
Nonetheless, firms may wish to draw on PPI lessons in relation to data retrieval, customer outreach, scheme governance and funder expectations. Given the fact-sensitive nature of the court’s finding of CCA unfairness, the FCA now appears to be looking at an industry-led solution with FCA oversight.
Bottom line
The UKSC has made it clear that undisclosed motor-finance commissions are not automatically unlawful, but they can still trigger CCA unfairness where the commission is exceptionally high and the customer is misled. There remains, however, an open question as to whether either limb could be so egregious as to render the relationship unfair in any event. While this judgment will be a relief for lenders, we will have to await the outcome of the FCA consultation process before we know exactly how the test for unfair relationship will be applied and what the extent of the liability is likely to be.
- See the UKSC’s judgment in full.
- See the FCA’s statement for more details on its consultation on a compensation scheme (3 August 2025).
- As at [204]-[207] of the UKSC judgment. See also Wood v Commercial First Business Ltd [2022] Ch 123.
- Hurstanger Ltd v Wilson [2007] 1 WLR 2351.
- See the FCA’s market analyst motor finance briefing (3 August 2025).
- Again, see the FCA’s statement and market analyst motor finance briefing (3 August 2025).
In-depth 2025-211
