Supreme Court Hears Pivotal Appeals on Secret Car Finance Commissions – April 2025 Update
Between 1–3 April 2025, the UK Supreme Court heard three significant conjoined appeals concerning car finance commission disputes, which could reshape the legal landscape for motor finance agreements. The cases involved were:
- Hopcraft and another v Close Brothers Limited (UKSC/2024/0157)
- Johnson v FirstRand Bank Limited (t/a MotoNovo Finance) (UKSC/2024/0158)
- Wrench v FirstRand Bank Limited (t/a MotoNovo Finance) (UKSC/2024/0159)
Each of these appeals centred around the payment of undisclosed or inadequately disclosed commissions by lenders to car dealers in connection with hire purchase agreements, and whether such practices breached common law principles, such as bribery, fiduciary duties, and accessory liability, as well as statutory protections under the Consumer Credit Act 1974.
Background to the Appeals
In all three cases, consumers entered into car finance agreements without being made properly aware that their dealers were receiving commission payments from the lenders. The appeals raise important questions about consumer rights, the duty of disclosure, and the consequences of secret commissions in finance transactions.
Hopcraft v Close Brothers
In this case, the commission arrangement was entirely undisclosed. The initial ruling went against the consumers, but they later succeeded in escalating the matter to the Court of Appeal, which sided with them.
Wrench v MotoNovo Finance
Although the lender’s terms mentioned the possibility of a commission, the consumer argued they were not given full and informed consent about the payment. The trial court ruled in favour of the consumer, but the lender’s appeal was allowed. Eventually, the Court of Appeal reversed that decision and ruled in favour of the consumer once again.
Johnson v MotoNovo Finance
This case included a “suitability statement” signed by the consumer, acknowledging that commission “may” be paid. Still, the consumer argued that the consent was not fully informed. The consumer lost at both the trial and appeal stages, but the Court of Appeal later ruled in their favour.
The Court of Appeal, in its October 2024 judgment, found that:
- Dealers owed both a disinterested duty and a fiduciary duty to customers.
- Commissions that were not sufficiently disclosed amounted to secret commissions.
- Disclosure must be clear, prominent, and explicit, not buried within terms and conditions.
- Customers must receive all material information to give fully informed consent.
Supreme Court Appeal Arguments
Day One – April 1
The Supreme Court began hearing arguments from the lenders’ legal teams, addressing key questions:
- Do car dealers owe fiduciary or disinterested duties to customers?
- Can commission payments amount to common law bribery?
- Should remedies for secret commissions come from common law or equity?
- Can lenders be held liable as dishonest accessories if the dealer breached duties?
The lenders argued that no fiduciary relationship existed between dealers and customers and that the current common law bribery doctrine was outdated. They also questioned whether commission disclosure requirements were too strict.
Day Two – April 2
The focus shifted to:
- Whether inadequate commission disclosure qualifies as bribery.
- Whether the failure to disclose created an unfair relationship under Section 140A of the Consumer Credit Act 1974.
The National Franchised Dealers Association (NFDA) intervened, highlighting the industry norm of commission payments in hire purchase agreements. Meanwhile, the Respondents’ counsel defended the current law on bribery and fiduciary duties, arguing that commission secrecy undermined trust and fairness in financial transactions.
Day Three – April 3
The Respondents’ team continued submissions, drawing attention to the specific facts and evidence in each case. Their arguments emphasised:
- The importance of informed consent and transparency.
- That consumers were not expected to identify hidden clauses in small print.
- That accessory liability applies if the lender knew the dealer was acting improperly.
The Financial Conduct Authority (FCA) also made submissions, expressing concern over the broad scope of fiduciary duty but supported retaining the law on common law bribery. The FCA also indicated a potential redress scheme may be announced within six weeks of the Supreme Court’s decision.
What Happens Next?
The Supreme Court judgment is expected around July 2025. Depending on the outcome, the implications could be far-reaching:
If the Respondents Win:
- Thousands of car finance commission claims currently on hold could proceed or be settled.
- The FCA redress scheme may launch, streamlining compensation for affected consumers.
- Motor finance providers and dealers may face tighter regulation and disclosure obligations.
If the Appellants Win:
- The landscape of secret commission claims could shift dramatically, potentially ending further litigation.
- Lenders may seek to recover legal costs and strike out ongoing claims.
- The proposed FCA redress scheme may be shelved, and current business practices may continue with fewer legal risks.
Final Thoughts
This landmark appeal could redefine how car finance arrangements are regulated in the UK. The decision will set a precedent for what counts as informed disclosure, whether fiduciary duties apply to dealers, and the scope of consumer protection in motor finance. Until then, the industry, legal professionals, and consumers alike must wait to see which direction the Supreme Court will take.
