On 1st of August 2025, the UK Supreme Court issued a landmark ruling in Hopcraft v Close Brothers / Johnson v FirstRand / Wrench v FirstRand [2025] UKSC 33. It overturned key findings of the October 2024 Court of Appeal decision, ruling that:
- Motor dealers and brokers do not owe a fiduciary duty to customers in typical three‑party motor finance transactions.
- Commissions paid by finance providers to dealers are not automatically unlawful “bribes” under common law.
However, the court did uphold one consumer case (Mr Johnson), finding an “unfair relationship” under the Consumer Credit Act (CCA) due to a very high, undisclosed commission (55% of the total credit charge) and misleading documentation.
Impact on Credit Brokers in Motor Finance
1. Legal Precedent & Fiduciary Duty
Credit brokers and dealers acting in their traditional role as part of the sale‑and‑finance package can confidently assert they do not owe fiduciary duties to consumers under these transaction models. This rolls back the threat of widespread liability that had followed the Court of Appeal’s expansive interpretation.
2. Consumer Credit Act – Unfair Relationship Claims
Even without fiduciary obligations, brokers remain exposed to CCA claims if commission structures:
- Are disproportionately large relative to the total credit cost,
- Were not properly disclosed,
- Or could reasonably mislead unsophisticated consumers.
Firms should review historic commission setups if they have not done so already, particularly discretionary commission arrangements (DCAs).
FCA Redress Scheme & Broader Regulatory Risks
The Financial Conduct Authority (FCA) has responded by proposing a redress scheme covering historic credit agreements, primarily involving DCAs and other undisclosed commission terms dating back to 2007. Estimated losses to consumers could total £9–18 billion, potentially involving over 14 million affected contracts.
The FCA’s consultation will define:
- What constitutes an “unfair relationship,”
- Eligibility thresholds,
- Compensation calculation likely including commission plus simple interest (base rate +1%, circa 3% annually).
Compensation payouts are targeted to begin in 2026.
What Firms Should Do Now
- Audit historic practices, especially pre‑2021 DCAs and commission disclosures.
- Align disclosures with FCA CONC rules: ensure material impact info is clear when required.
- Prepare for redress handback, updating financial provisions if unsure of past compliance.
- Train staff on identifying and disclosing commission where appropriate.
- Monitor the FCA consultation and regulatory guidance for actionable thresholds and methodology.
The Supreme Court has significantly narrowed legal risk for credit brokers in motor finance but did not fully eliminate the possibility of CCA-based liability where commission structures were unfair or undisclosed. With a redress scheme on the horizon, firms should take this ruling as both clarity and a prompt to ensure legacy compliance.
