"No Bribery, But Fairness First: Supreme Court’s Landmark Car Finance Ruling"

In a landmark decision, the UK Supreme Court resolved three conjoined appeals concerning the legality of commission payments made by lenders to motor dealers in hire purchase car finance arrangements.

This decision clarifies the legal framework for MOTOR FINANCE COMMISSIONS, IMPACTING LENDERS, DEALERS, AND CONSUMERS by reinforcing standard practices while highlighting the need for clear disclosure to ensure fairness.

Speed read

The UK Supreme Court ruled on three conjoined appeals regarding commission payments from lenders to motor dealers in hire purchase car finance deals.

The key points are:

• No Liability for Bribery or Fiduciary Duty Breach:
• The Court held that lenders were not liable for common law bribery, as dealers did not owe fiduciary duties to customers.
• The dealer-customer relationship was a standard commercial transaction, with dealers acting primarily to sell cars, not as agents for customers.
• This overturned the Court of Appeal's findings and restored the industry's standard practice of commission payments.
• Unfair Relationship in One Case:
• In Mr. Johnson's case, the Court found an unfair relationship under section 140A of the Consumer Credit Act 1974 due to a high, undisclosed commission (£1,650.95) and the dealer's obligation to prioritize one lender, limiting customer choice. T
• He lack of transparency and misleading information breached FCA rules, contributing to the unfairness.
• The lender was ordered to repay the commission with interest from 29 July 2017.
• Implications:
• The ruling largely upholds the status quo for commission payments in motor finance, dismissing claims of bribery or fiduciary duty breaches.
• However, Mr. Johnson's case sets a precedent for statutory claims under the CCA, emphasizing the importance of transparent commission disclosures to avoid unfair relationships.
• This decision clarifies the legal framework for motor finance commissions, impacting lenders, dealers, and consumers by reinforcing standard practices while highlighting the need for clear disclosure to ensure fairness.

Long read

The following is an extract from Gowlingwlg.Com/En-Gb article, where they review the key points of the decision and what it means for the finance industry and affected consumers.

• https://gowlingwlg.com/en-gb/insights-resources/articles/2025/supreme-court-clarifies-no-fiduciary-duty-owed-by-car-dealers-in-finance-arrangements

Summary of the Supreme Court decision

1. The Supreme Court held that lenders were not liable for common law bribery as a result of making commission payments to the dealer-brokers.
2. The dealer-brokers were also found not to owe fiduciary duties to customers, meaning lenders could not be liable as accessories to any breach of fiduciary duty.
3. These findings effectively restore the status quo in the financial services sector, where commission payments have long been part of standard commercial practice.
4. An exception arose in the case of one respondent, Mr Johnson, where the Supreme Court held that he was entitled to succeed in his claim under section 140A of the Consumer Credit Act 1974 (CCA).
5. The Court ruled that the relationship between Mr Johnson and the lender was unfair because of the size of the commission and the failure to disclose the commission. An order was made for the dealer to pay the commission to Mr Johnson with interest.
6. This part of the judgment is likely to set a benchmark for future statutory claims.

Background to the appeal

1. There were three linked claims concerning motor finance commissions.
1. https://gowlingwlg.com/insights-resources/articles/2024/court-of-appeal-slams-brakes-on-hidden-commission-payments-in-finance-agreements
2. In each case, the customer had bought a second-hand car via motor finance arranged through a car dealer. The dealers received a commission from the lender, which was not disclosed or was only partially disclosed to the customer.
3. The Court of Appeal found that dealers owed customers a duty of impartiality when recommending finance, creating a fiduciary relationship.
4. Accepting commission from lenders on concluded finance arrangements conflicted with that duty, and the lenders were therefore found liable for
1. Bribery (in two of the claims) or
2. Dishonest assistance (the third).
5. The lenders appealed these findings to the Supreme Court.
1. https://gowlingwlg.com/insights-resources/articles/2025/motor-finance-face-off

Fiduciary duty and how the court applied the law to the tripartite relationship

1. The Supreme Court considered whether a fiduciary duty could arise in a typical car finance deal, involving a customer, dealer and lender, such that a commission payment would amount to a bribe at common law or a breach of fiduciary duty.

Their key findings were:

1. The arrangement was a standard arm 's-length transaction, with each party acting in pursuit of its commercial interests.
1. The dealer's offer to assist in securing a suitable finance did not imply any abandonment of its primary objective of selling the vehicle at a profit.
2. The dealer's role in arranging finance
1. Was considered as ancillary to their primary role of selling the car;
2. It was not provided as a separate service.
3. The dealers did not commit to act exclusively in the customer's interests.
4. Dealers did not act as agents for the customers:
1. They could not bind them in legal relations with the lender, and customers signed the agreements themselves.
2. Although the dealer obtained confidential information, this did not establish agency.
5. While customers were generally less informed or vulnerable, this alone was not sufficient to place fiduciary obligations on the dealer.
6. The Court dismissed the idea that the transaction could be split into two stages with differing duties.
1. Car sale and
2. Finance arrangement
7. The dealer's interest persists until completion of the sale.
8. On this basis, the Supreme Court concluded that there was
1. NO fiduciary duty and
2. NO basis for bribery or equitable claims relating to undisclosed commissions.
9. As a result, the lenders' appeals were upheld.

Mr Johnson's cas and Unfairness under section 140A of the Consumer Credit Act 1974

1. The Supreme Court also considered whether the conduct of the car dealer Mr Johnson's case created an unfair relationship under section 140A of the CCA, which allows the courts to intervene to vary or set aside credit agreements where the relationship is unfair to the debtor.
2. The Supreme Court examined if the dealers' involvement in sourcing the finance packages created an unfair relationship under the statute.

Key factors included

1. The transparency of commission payments,
2. The dealer's role in negotiating finance terms and
3. Whether the customer was placed at a disadvantage as a result of the dealer's conduct.

The Supreme Court found that:

1. The high commission payable in Mr Johnson's case was a "powerful indication of unfairness" and because it was not disclosed, Mr Johnson had no opportunity to question it.
2. The dealer was contractually obliged to offer all finance business to one particular lender first, effectively limiting customer choice.
3. This was not disclosed to Mr Johnson, and the Suitability Document provided to him misleadingly suggested impartial advice from a panel of lenders.
4. The dealer and lender breached several rules in the FCA's Consumer Credit Sourcebook (CONC), including
1. Failing to disclose commission payments (CONC 4.5.3R) and
2. Failing to explain lender relationships (CONC 3.7.3R).
5. Although Mr Johnson did not read the documents provided, the Court acknowledged he was commercially unsophisticated and questioned to what extent a lender could reasonably expect a customer to have read and understood the detail of the finance documents, especially when key disclosures, such as the commission payment were not prominently presented.
6. As a result, Mr Johnson was unaware of the commission, which contributed to the unfairness of the relationship under section 140A CCA.
7. The Supreme Court accordingly ordered the lender to repay the commission of £1,650.95 to Mr Johnson, with interest from the date of the agreement (29 July 2017).

Source

https://gowlingwlg.com/en-gb/insights-resources/articles/2025/supreme-court-clarifies-no-fiduciary-duty-owed-by-car-dealers-in-finance-arrangements