{"id":458,"date":"2025-08-20T09:45:03","date_gmt":"2025-08-20T09:45:03","guid":{"rendered":"https:\/\/ruthfinch.com\/website\/?p=458"},"modified":"2025-08-20T09:45:03","modified_gmt":"2025-08-20T09:45:03","slug":"the-supreme-courts-ruling-in-the-motor-finance-commission-cases-some-thoughts","status":"publish","type":"post","link":"https:\/\/ruthfinch.com\/website\/the-supreme-courts-ruling-in-the-motor-finance-commission-cases-some-thoughts\/","title":{"rendered":"THE SUPREME COURT\u2019S RULING IN THE MOTOR FINANCE COMMISSION CASES: SOME THOUGHTS"},"content":{"rendered":"<p>The Supreme Court gave its judgment on 1 August 2025 in three cases regarding motor finance commission<a href=\"#_ftn1\" name=\"_ftnref1\">[1]<\/a>. Each of the cases involved issues about payment of commission by lenders to motor dealers in connection with providing finance for hire purchase of cars and where the commission isn\u2019t disclosed \u2013 or is only partly disclosed \u2013 to the consumer who buys the car and enters into a hire purchase contract with the lender. The cases have received considerable coverage in the media, as well as in the finance industry and the legal profession. My view is that there\u2019s still potential for claims in some circumstances and that there are points from the judgment that lenders and brokers in other sectors of the consumer credit market need to consider.<\/p>\n<p>The key issue in these three cases is whether the car dealer, when acting as broker, could receive commission from the lender without the customer\u2019s fully informed consent. (That would be expressed differently in legal terms but I\u2019m trying to get to the nub of the commercial and practical issues.) The Supreme Court ruled that the commission could be received by the brokers in these cases but also decided that the relationship between one of the individuals (Mr Johnson) and his lender (FirstRand Bank) was \u201cunfair\u201d for the purposes of s140A of the Consumer Credit Act and that the lender had to pay the commission to Mr Johnson.<\/p>\n<p>The headline concern of banks and other lenders that commission paid to dealers might have to be reimbursed to customers has been addressed, with the Court allowing the lenders\u2019 appeal on all but one item, but I think there are three points to pay attention to.<\/p>\n<p>1\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <strong>Unfair relationship claims under s140A of the Consumer Credit Act 1974 (the CCA)<\/strong> \u2013 this is the appeal that wasn\u2019t allowed under the Supreme Court\u2019s decision. The Court noted that the \u201ctest of the unfairness of the relationship of debtor and creditor is stated in general terms which permit courts to take account of a very broad range of factors\u201d. It was also noted that applying the test in each case will be \u201ca highly fact-sensitive exercise\u201d. Key points taken into account in Mr Johnson\u2019s case are the size of the commission (and the total charge for credit was 55% of the total amount paid) and a commercial tie between the dealer and the lender not being disclosed appropriately to the customer. Other factors might include vulnerability or other characteristics of the customer and whether regulatory requirements were complied with.<\/p>\n<p>It seems that there\u2019s scope for unfair relationship claims to be brought but:<\/p>\n<ul>\n<li>They\u2019ll be decided on their facts;<\/li>\n<li>It\u2019s unclear what factors would be taken into account;<\/li>\n<li>It\u2019s unclear how \u2018unfair\u2019 a relationship would have to be before a claim would succeed; and<\/li>\n<li>It\u2019s unclear how the current regulatory regime would apply where a claim is based on legislation (i.e. the CCA) \u2013 and whether it would apply at all.<\/li>\n<\/ul>\n<p>2\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 In legal terms, the key issue in the cases was whether:<\/p>\n<ul>\n<li>A dealer owed a fiduciary duty to the customer to avoid a conflict between its interest and the interest of the customer in relation to the dealer\u2019s role in obtaining and negotiating a finance package for the customer \u2026<\/li>\n<li>That would make receiving an undisclosed commission from the lender a bribe at common law or a breach of fiduciary duty \u2026<\/li>\n<li>Unless the customer gave their fully-informed consent.<\/li>\n<\/ul>\n<p>The Court held that there wasn\u2019t such a duty because each party \u2013 customer; dealer; lender \u2013 was considering its own commercial interests. The dealer wasn\u2019t acting as the customer\u2019s agent and any dependency or vulnerability on the part of the customer didn\u2019t alter that. However, <strong>the Court pointed out that the outcome might be different in a case where the nature of the service undertaken (by a broker to a customer) can only sensibly be provided by someone who puts their own personal interests aside<a href=\"#_ftn2\" name=\"_ftnref2\">[2]<\/a><\/strong>. No examples were given and the consequences of there being a fiduciary relationship weren\u2019t worked through by the Court. However, situations in which there\u2019s any payment from the customer to the dealer, a contract between them or the broker holds themselves out as acting for the customer should be considered carefully. Cases of extreme vulnerability might also come under review if the broker goes above and beyond what they would usually do to help and support the customer, although the position is far from clearcut. It would, though, be sensible for lenders and brokers to consider how they can avoid straying into a situation of this type.<\/p>\n<p>3\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Comments in <em>the Court of Appeal\u2019s judgment<\/em> indicate that payment of commissions were more likely to be missed by customers or misunderstood where a broker has another way of making money. In the context of car financing arranged by a car dealer, a customer (particularly one that is unsophisticated) could reasonably assume that the dealer-broker will make money from the car sale, rather than from arranging financing (i.e. through a commission payment). Other situations involving commissions or comparable payments include:<\/p>\n<ul>\n<li>Financing arranged for furniture and other items;<\/li>\n<li>Insurance arranged by third-parties for customers \u2013 examples include pet insurance arranged by vets, dental insurance arranged by dentists and travel insurance arranged by travel companies or banks; and<\/li>\n<li>Loans, credit cards and other forms of financing arranged through price comparison websites \u2013 and insurance too.<\/li>\n<\/ul>\n<p>In each of these cases (the argument would go), a customer could reasonably expect that the person selling them goods or providing services would make their money through that rather than through commission payments. Customers might also not understand that the person selling goods or providing services is acting as a broker. Even in the case of price comparison websites, many customers might not be aware that commission is payable unless it\u2019s brought to their attention, expecting that money is made from adverts on the site.<\/p>\n<p>It seems that this approach no longer stands. The Supreme Court is clear that each party (customer; dealer; lender) is in a position where it considers its own commercial interests<a href=\"#_ftn3\" name=\"_ftnref3\">[3]<\/a>. Added to the point in 2 above that the outcome might be different where the nature of the service undertaken (by a broker to a customer) can only sensibly be provided by someone who puts their own personal interests aside, it seems that <strong>fiduciary duties and the resulting requirement to avoid conflicts of interests are most likely to be relevant where brokers present themselves to customers as acting for them<\/strong>. And <strong>that\u2019s more likely to occur <em>outside<\/em> the situations listed in the bullet points above<\/strong> \u2013 i.e. where brokers act only as brokers rather than also acting as dealers or others providing commercial services.<\/p>\n<p>Finally, a point to note. There were numerous references in the Court of Appeal\u2019s decision to customer vulnerability and customers being unsophisticated \u2013 the customers in <em>Hopcarft<\/em>, <em>Johnson<\/em> and <em>Wrench<\/em>, and those in other cases discussed in the judgment. The Court seemed to be saying that, where a customer is vulnerable or unsophisticated, lenders have to do more to ensure that there\u2019s full disclosure and fully-informed consent. The Supreme Court took a different line, stating that dependency or vulnerability aren\u2019t indications of a fiduciary relationship unless there\u2019s an undertaking of loyalty. A customer might have trust and confidence in the dealer but the Court equated this with commercial parties negotiating at arm\u2019s length not with a fiduciary relationship.<\/p>\n<p>&nbsp;<\/p>\n<p>Ruth Finch<\/p>\n<p>August 2025<\/p>\n<p>&nbsp;<\/p>\n<p><em>This article is intended to provide general information about current and expected topics and perspectives that might be of interest. It does not provide or constitute, or purport to provide or constitute, advice relevant to any particular circumstances. Legal or other professional advice relevant to any particular circumstances should always be sought<\/em><\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\">[1]<\/a> Hopcraft and another (Respondents) v Close Brothers Limited (Appellant); Johnson (Respondent) v FirstRand Bank Limited (London Branch) t\/a MotoNovo Finance (Appellant); Wrench (Respondent) v FirstRand Bank Limited (London Branch) t\/a MotoNovo Finance (Appellant) [2025] UKSC 33.<\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\">[2]<\/a> See para 286 of the judgment.<\/p>\n<p><a href=\"#_ftnref3\" name=\"_ftn3\">[3]<\/a> It\u2019s interesting to note that the judgment refers, fairly consistently, to the dealer-broker as the \u201cdealer\u201d, downplaying its role as broker.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Supreme Court gave its judgment on 1 August 2025 in three cases regarding motor finance commission[1]. Each of the cases involved issues about payment of commission by lenders to motor dealers in connection with providing finance for hire purchase of cars and where the commission isn\u2019t disclosed \u2013 or is only partly disclosed \u2013 [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[159,148,150,151,161,162,160],"class_list":["post-458","post","type-post","status-publish","format-standard","hentry","category-articles","tag-hopcraft","tag-johnson","tag-motor-finance","tag-motor-finance-commission","tag-supreme-court","tag-supreme-court-judgment","tag-wrench"],"_links":{"self":[{"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/posts\/458","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/comments?post=458"}],"version-history":[{"count":1,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/posts\/458\/revisions"}],"predecessor-version":[{"id":459,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/posts\/458\/revisions\/459"}],"wp:attachment":[{"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/media?parent=458"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/categories?post=458"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ruthfinch.com\/website\/wp-json\/wp\/v2\/tags?post=458"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}