Piers Bambridge
18 August 2025
The recent Supreme Court judgment on commission disclosure in motor finance agreements has sent ripples through the automotive sector. Yet, its real impact on the industry may be more nuanced than headline reactions suggest.
The Court essentially upheld an FCA rule introduced on 28 January 2021 that banned discretionary commission arrangements (DCAs). These arrangements allowed brokers to vary the customer interest rate on finance agreements, earning higher commission the higher the rate. The Court’s decision reinforces that lack of disclosure in such contexts can, in certain circumstances, create an “unfair relationship” under the Consumer Credit Act 1974.
While the judgment brings judicial weight to the FCA’s earlier position, it does not introduce entirely new obligations. Instead, it confirms that past practices in breach of disclosure requirements may give rise to claims for redress. The FCA has announced a compensation scheme that could extend as far back as 2007, creating a potentially substantial evidential burden for lenders, brokers, and consumers alike. Locating contractual documents and commission records from over a decade ago will be challenging, raising real questions about how fair and effective the redress process can be.
From a regulatory point of view, the decision highlights the ongoing push for more transparency and the removal of conflicts of interest in retail finance. However, as the sector adapts, there’s a risk that less flexibility in pricing could lead major lenders to quietly align their rates, reducing competition. Legal practitioners may therefore find themselves advising not only on compliance but also on the competition law implications of a less flexible pricing environment.
The FCA’s task is now twofold:
- Supervisory oversight – ensuring that current commission models remain compliant and free from indirect incentives that could harm consumers.
- Run the redress scheme– designing a scheme that is proportionate, evidence-based, and protected against misuse, while balancing the rights of consumers with the practical limitations facing firms.
For solicitors working in financial services, consumer rights, or competition law, this case is a reminder of how closely regulatory action and court decisions are linked. It also reinforces the need for proactive client audits to identify legacy risks, particularly where commission structures were complex or poorly documented.
Ultimately, the Supreme Court ruling represents an incremental but important milestone in aligning the motor finance industry with principles of transparency and fairness. The challenge now lies in implementing redress without introducing new inefficiencies or market distortions, a balancing act that will require both robust legal input and industry cooperation.
