Scandal regarding billions in auto loans in the UK to be decided by the highest court
In a landmark decision on August 1, 2025, the Supreme Court of the UK delivered its verdict in the motor finance commissions case (Hopcraft and others v Close Brothers Ltd and others [2025] UKSC 33). The ruling, which has significant implications for millions of drivers and financial institutions, largely favoured lenders, overturning the previous Court of Appeal judgment.
The Court's key findings included:
- Car dealers arranging finance do not typically owe fiduciary duties to their customers.
- Claims based on bribery or dishonest assistance require a fiduciary relationship, which was not established in this case.
- The Court rejected the notion of a "disinterested duty" giving rise to fiduciary obligations, raising the threshold for establishing lender liability.
- Disclosure of commissions must meet a standard of informed consent; vague disclosures like "a commission may be paid" are insufficient.
However, there was limited success under section 140A of the Consumer Credit Act 1974. One claimant, Mr Johnson, succeeded on the basis of an "unfair relationship" due to a substantial undisclosed commission (25% of the loan amount) and misleading documentation.
The ruling leaves some exposure for banks, as customers with claims under the Consumer Credit Act for unfair relationships involving substantial undisclosed commissions may still be entitled to compensation. The Supreme Court's decision clarified that lenders have not been fully "let off the hook," and further legal and regulatory developments are expected.
The Financial Conduct Authority (FCA) has indicated ongoing interest in the matter, suggesting that compensation schemes or further FCA actions could arise for affected drivers. However, specific compensation amounts or schemes have yet to be finalized or publicly detailed.
The potential exposure of banks, if the Supreme Court rules in favor of borrowers, could be around £11 billion. The Labour government may be concerned about the impact on banks' willingness to provide credit amid economic uncertainty. The FCA could mandate a collective automatic compensation programme should the court sides with borrowers.
Consumers in the aforementioned cases are seeking compensation. While the broad claims of lender liability for undisclosed commissions have been dismissed, individual circumstances will determine the compensation for eligible drivers, which may be pursued through FCA-led schemes or further litigation.
[1] BBC News, "Supreme Court rules on car finance commission case," August 1, 2025, https://www.bbc.co.uk/news/business-58059287 [2] Financial Times, "Supreme Court rejects car finance commission claims," August 1, 2025, https://www.ft.com/content/88f6e98d-425c-4f9a-96e4-13e2c4c874b9 [3] The Guardian, "Supreme Court rules against car finance commission claims," August 1, 2025, https://www.theguardian.com/business/2025/aug/01/supreme-court-rules-against-car-finance-commission-claims
- In response to the Supreme Court's decision on motor finance commissions, the Financial Conduct Authority (FCA) has shown continued interest in the matter, signaling potential compensation schemes or further actions for affected drivers.
- Despite the rejection of broad claims of lender liability for undisclosed commissions, individuals with eligible claims, such as Mr Johnson, may still be entitled to compensation through FCA-led schemes or litigation.
- The banking and insurance industry, including financial institutions and banks, could face potential exposure of around £11 billion if the Supreme Court rules in favor of borrowers, with implications for industry practices in Africa and other global markets.
