Supreme Court motor finance ruling - What Section 140A of the Consumer Credit Act means for complaints and the FCA Redress Scheme

Following the appeal hearing in April this year, today the UK Supreme Court delivered its decision in Hopcraft and another v Close Brothers Limited, Johnson v MotoNovo (FirstRand Bank Limited), and Wrench v MotoNovo ([2025] UKSC 33). You can read here about the issues the Court was being asked to determine.

The ruling has now closed the door on claims based on fiduciary duty and bribery, but firmly made way for a wave of future complaints under Section 140A of the Consumer Credit Act 1974.

The judgment prompted a rapid response from the regulators. Although the Financial Conduct Authority (FCA) first signalled in June 2025 that it was exploring a redress scheme, the Court’s confirmation of legal unfairness has now accelerated that process. Within hours of the ruling, the FCA announced plans to consult on an industry-wide compensation scheme that could cost between £9 billion and £18 billion.

The background: Commission practices in motor finance

The appeals centred on the widespread practice in UK motor finance where lenders pay commission to car dealers for arranging credit. In many cases, these commissions were not disclosed, or only partially disclosed in vague terms, such as stating that “a commission may be paid.”

The customers in each case alleged that this lack of disclosure created:

• A breach of fiduciary duty

• A bribe or secret commission

• An unfair relationship under the Consumer Credit Act 1974 (section 140A)

Supreme Court decision: A split ruling with major consequences

The Court rejected the first two legal arguments, finding that car dealers were not fiduciaries and that undisclosed commissions do not, on their own, constitute bribes. These findings will offer some relief to lenders.

However, in Johnson v MotoNovo, the Court ruled in the customer’s favour under section 140A of the Consumer Credit Act, confirming that the lender–borrower relationship was legally unfair.

The reasons were fact-specific but critically important because they highlighted a 'powerful indication' of an unfair relationship and its 'material impact' on the customer. In this case:

• A very high commission (25% of the loan amount; 55% of the total charges for credit)

• Misleading documents with low prominence and limited consumer understanding

The judgment is significant because the Court clarified that the list of factors cited as being unfair in the Johnson case is not exhaustive. Lord Reed, delivering the verdict, emphasised that Section 140A of the Consumer Credit Act 1974 permits the court to take into account a wide range of contextual factors, and does not require evidence of bad faith or misrepresentation.

This creates a broad and flexible standard, which claims management companies (CMCs) and litigation firms are now likely to use to reshape and relaunch previously stalled complaints.

FCA Redress Scheme: Supreme Court clarity enables next steps

The FCA had first indicated in June 2025 that it was considering a redress scheme.

Following Friday’s judgment, the FCA confirmed it will launch a consultation by early October 2025 on a motor finance compensation scheme to address historic harm under Section 140A of the Consumer Credit Act 1974. The regulator noted that the Supreme Court “agreed with several factors we had identified which could point towards an unfair relationship,” including high or discretionary commissions, limited disclosure, and the characteristics of the consumer — all of which will now help shape a fair and consistent redress process. The FCA added:

'This clarity helps us... prior to this judgment, there were different interpretations of the law coming from different courts.'

Key facts from the FCA announcement:

• Redress payments expected to begin in 2026

• Deadline for customers to submit complaints: end of 2025

• Average payout per individual is likely to be under £950

• Estimated total cost: £9–£18 billion, depending on scheme design

• Consumers are advised not to use CMCs or litigation firms; as doing so could reduce their payout by around30%

• The scheme will prioritise fairness, speed, and certainty, balancing the needs of consumers, firms, and investors

The FCA has committed to publishing rules on how lenders should assess claims and to closely monitoring firm compliance once the scheme is in effect.

Record retention: A looming operational challenge

The compensation scheme is expected to cover motor finance agreements dating back to 2007, aligning with the Financial Ombudsman Service’s established approach to long-running complaints. However, retrieving records from that far back presents significant operational challenges. While FCA rules typically require firms to retain complaint-related records for at least six years, DISP App 5 now requires lenders and brokers to retain and preserve relevant records from pre-2021 agreements through to April 2026, regardless of whether a complaint has been raised.

That said, for agreements where the customer relationship ended many years ago, especially before 2015, complete records may no longer be accessible, particularly for firms who followed the standard six- or seven-year retention cycle. This raises both evidential risks and potential reputational consequences, especially if customers, CMCs, or the Ombudsman dispute a firm’s version of events based on incomplete files.

Nikhil Rathi, FCA Chief Executive, stated:

“It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated.”

“Our aim is a compensation scheme that’s fair and easy to participate in, so there’s no need to use a claims management company or law firm.”

“We hope to start getting people any money they are owed next year.”

Implications for Complaint Teams, Compliance, and the Ombudsman

The impact of the ruling and the FCA’s swift response is already being digested across the industry:

• Section 140A complaints are expected to rise sharply

• CMCs and litigation firms now have a clearer legal playbook for framing claims

• The Financial Ombudsman Service (FOS) is likely to face increased case volumes

• Firms need to ensure their complaint processes can handle large-scale, fair, and fast resolution. Specialist complaint management software can help firms achieve this

This judgment is far from being the last word. Further test cases are expected, as parties test the boundaries of what counts as “unfair.”

Final word: Legal clarity, regulatory pressure, and what's still to come

While the Supreme Court has now clarified the position on bribery and fiduciary duty, there's an irony worth noting: the industry-wide adoption of full commission disclosure, rolled out in October 2024, needs to be carefully worded because it could unintentionally elevate the dealer, lender, or intermediary into a fiduciary role.

The Court was clear: “unfairness” under Section 140A of the Consumer Credit Act 1974 is broad, contextual, and open to future interpretation. This leaves the door wide open for further test cases and claims management companies (CMCs) and litigation firms now have a playbook for exactly how to frame new complaints. Firms, in turn, must prepare for the volume, complexity, and nuance of these claims,not just by scale, but by substance.

What also remains to be seen is whether CMC and law firm behaviour evolves. A recent High Court ruling in Vanquis Bank Limited v TMS Legal Limited [2025] EWHC 1599 (KB) has drawn attention to aggressive bulk-claim practices.

Vanquis is alleging that TMS Legal caused them over £12 million in losses by submitting large volumes of unmeritorious affordability complaints. The claim will now proceed to trial, and other lenders will be watching closely. This action, along with the FCA's letter to CMCs dated 31st July 2025, is the beginning of meaningful pushback against what some view as an industrialised, spray-and-pray model of claims acquisition.

This isn’t just about motor finance. The legal principles and operational implications now reach into other sectors regulated under the Consumer Credit Act and beyond.

Yes, lenders may breathe a cautious sigh of relief that only one of the three Supreme Court appeals was upheld and that compensation exposure, while still substantial, is significantly lower than feared. But this isn't the moment for celebration. The real test is whether transparency and fairness in the whole of financial services can be achieved.

Consumers deserve protection, fairness, and transparency, especially where opaque commission structures or misleading documentation have gone unchallenged for too long. But the FCA now faces the difficult task of balancing redress and reform with market sustainability. The regulator has acknowledged that it must ensure that the motor finance sector remains competitive so that customers retain freedom of choice and access to finance products that genuinely meet their needs. If this can be achieved, then is the time to pop the champagne corks and celebrate.

Legal precedents that shaped the Supreme Court’s reasoning

Wood v Commercial First Business Ltd [2021] EWCA Civ 471

• Overruled in this case. The Supreme Court rejected the idea that fiduciary duties can arise in standard credit brokerage relationships without clear obligations of loyalty or representation.

Hurstanger Ltd v Wilson [2007] 1 WLR 2351

• Found insufficient to ground bribery or fiduciary claims due to lack of full, prominent disclosure. The Court reaffirmed that vague or partial disclosures do not satisfy legal standards.

FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45

• Reconfirmed that secret commissions may be recovered only where the recipient owes a fiduciary duty, a threshold not met in typical dealer–lender–customer relationships.

Bristol & West Building Society v Mothew [1998] Ch 1

• Provided the foundational definition of fiduciary duty and its limits, particularly relevant in distinguishing advice from agency.

Hospital Products Ltd v United States Surgical Corp [1984] HCA 64 (High Court of Australia)

• Cited to reinforce that not every relationship involving trust or influence gives rise to fiduciary obligations, especially in arms-length commercial contexts.

Kelly v Cooper [1993] AC 205 (Privy Council)

• Highlighted how commercial relationships can involve divided loyalties and contractual limits on fiduciary expectations. Used to support the argument that dealers can serve multiple interests transparently.

Plevin v Paragon Personal Finance Ltd [2014] UKSC 42

• Concerned non-disclosure of a very large PPI commission and held that failure to disclose could render a credit relationship unfair under the Consumer Credit Act 1974. While influential, the Supreme Court in [2025] UKSC 33 made clear that Plevin is not directly applicable to motor finance discretionary commission cases due to key differences in the product structure, market arrangements, and disclosure context.

These judgments reflect the Supreme Court’s cautious and precise approach: protecting consumers where warranted under statute but drawing a firm line against extending equitable duties beyond their proper legal boundaries.

Further information on the Supreme Court’s decision can be found here.