Supreme Court Ruling on Concealed Commission Payments Assessment by DWF
The Financial Conduct Authority (FCA) has announced plans to establish a redress scheme for motor finance claims following the Supreme Court’s Johnson judgment. The ruling, which clarified that dealer commissions must be fully and transparently disclosed for informed consent, is expected to have significant implications for the motor finance industry.
In a press release, Ian Hughes, Consumer Intelligence’s managing director, commented on the FCA’s decision, stating that the move would help protect consumers and lay the foundations for a fairer motor finance market.
The FCA’s redress scheme will focus on claims where the commission paid to dealers was a substantial portion of the credit cost, such as commissions amounting to 25% or more of the loan amount. The scheme is expected to operate on a compensation framework that reflects the judgment’s logic on commission disclosure and unfair relationships.
According to the FCA, most individual compensations are likely to be under £950, although this figure may vary depending on the specifics of individual cases. The FCA is also considering a de minimis threshold to exclude trivial claims, ensuring that the scheme focuses on meaningful claims rather than very small losses.
Regarding the operation of the redress scheme, the FCA is evaluating whether it will operate on an opt-in or opt-out basis. No firm decision has been disclosed so far.
Brian Nimmo, Head of Redress at leading independent financial services consultancy Broadstone, has issued a comment on DCA cases, noting that providers are not completely off the hook. Nimmo suggests that providers should review their past practices and ensure transparency in their commission arrangements to avoid potential redress claims.
Kate Albert, CEO of PI specialist insurer Kova Professions, has also issued a comment on the Supreme Court case. Albert predicts that the claims management industry pursuing these mass claims may collapse as a result of the ruling.
In the Johnson case, the dealer’s representations to the customer were found to be false, as no mention was made of the tie the dealer had with the lender. This ruling serves as a reminder to dealers to ensure that their disclosures are clear, transparent, and accurate to avoid potential redress claims.
The FCA’s consultation on the redress scheme is expected to be published in early October 2025 and will stay open for six weeks. The potential industry compensation cost could range from £9 billion to £18 billion, depending on the scheme design.
In summary, the FCA’s redress scheme for motor finance claims is a significant step towards ensuring fairness and transparency in the motor finance market. Providers are encouraged to review their commission arrangements and ensure that disclosures are clear, transparent, and accurate to avoid potential redress claims. The consultation on the redress scheme is an opportunity for industry experts and stakeholders to provide their feedback and contribute to the development of a fairer motor finance market.
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