Court renders long-awaited verdict in the motor finance commission case in the United Kingdom's Supreme Court
The Financial Conduct Authority (FCA) has announced plans for a redress scheme for motor finance lenders following a landmark Supreme Court decision in the Johnson case. The scheme, set to launch in 2026, will require lenders to compensate consumers for unfair commission arrangements, despite a ruling that motor dealers do not owe a fiduciary duty to their customers.
In August 2025, the Supreme Court handed down a decision in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance, determining that motor dealers do not owe a fiduciary duty to their customers. However, the FCA's regulatory framework remains critical, as lenders can still be held liable under the Consumer Credit Act 1974’s unfair relationship provisions if commissions were not properly disclosed according to FCA rules.
The FCA's redress scheme will address commissions paid since 2007, incorporating both discretionary and non-discretionary commissions. Compensation is expected to be paid in an orderly and consistent manner to consumers, with most individuals receiving under £950 per agreement.
Motor finance lenders have around 18 months to prepare before the scheme’s launch in 2026. The FCA will consult in early October 2025 on key elements such as inclusion criteria, interest on redress, and opt-in vs. opt-out arrangements.
The FCA's proposed redress scheme will consider remediation for consumers who may have lost out due to unfair and unlawful acts by lenders. It's important to note that the scheme does not currently include regulated hire agreements.
The FCA's decision to proceed with the redress scheme, despite the Supreme Court's ruling on fiduciary duties, introduces significant remediation obligations and potential costs for motor finance lenders. This creates ongoing uncertainty, particularly for securitized assets and market participants exposed to motor finance debt pools.
Meanwhile, the Court of Appeal will hear the appeal in Clydesdale Financial Services v Financial Ombudsman Service in September 2025. The appeal seeks to challenge the FOS's decision that Clydesdale Bank breached its duty of care to a customer in relation to a motor finance agreement.
The redress calculation will be informed by the degree of harm suffered by the consumer and the need for consumers to access affordable motor loans in the future. As the FCA moves forward with its redress scheme, it aims to strike a balance between compensating consumers and ensuring the continued availability of motor finance for consumers.
[1] FCA press release: FCA announces proposal for redress scheme for motor finance customers (2025) [2] Supreme Court judgment: Johnson v FirstRand Bank Limited t/a MotoNovo Finance (2025) UKSC 42 [3] FCA policy statement: Motor finance disclosure rules (2024) [4] Financial Ombudsman Service decision: Clydesdale Financial Services v Financial Ombudsman Service (2024) [5] FCA consultation paper: Redress scheme for motor finance customers (expected October 2025)
- The FCA's redress scheme, slated to commence in 2026, will require motor finance lenders to compensate consumers for unfair commission arrangements, as a part of the broader landscape of business, finance, and personal-finance practices.
- The planned scheme, being a significant component of the banking-and-insurance industry, will target commissions paid since 2007, with the possibility of consumers receiving remuneration amounting to under £950 per agreement.
- The FCA's redress scheme encompasses investing decisions made within the motor finance industry, as lenders must prepare for potential costs and ongoing uncertainty due to the new remediation obligations.
