Overturning the Court of Appeal’s decision last week, five justices held car dealers charging commission on loans did not owe fiduciary duties to customers as they were pursuing their ‘own commercial interests, free of any undertaking, express or implied, to act selflessly in the finding and negotiation of a finance package’.
The landmark decision, in Johnson and others v Firstrand Bank and others [2025] UKSC 33, immediately dashed claim managers’ hopes of a £44bn pay-out bonanza from lenders. In one of the three cases only, Johnson, the court ordered the lender to repay the commission with interest on the basis the relationship was unfair.
NLJ columnist Professor Dominic Regan, of City Law School, said: ‘What struck me was the way in which the court was so keen to support commerce and the right to make a living/ profit.
‘At para [110] the conventional commercial transaction is sensibly upheld. Businesses need to make a profit. There was nothing untoward save in Johnson where there was palpable unfairness.’
According to Browne Jacobson partner Helen Simm, however, ‘the sting could still be in the tail.
‘The court upheld Mr Johnson’s claim under s 140 of the Consumer Credit Act 1974 (CCA) due to a 55% commission, hidden commercial ties, and misleading paperwork. The clear message is that undisclosed, excessive commissions and deceptive sales tactics may still trigger findings of unfairness under CCA.
‘So while the headline claim has fallen away, the door remains very much ajar and many consumers may yet pursue claims on this narrower, but still potent, basis.’
Jeremy Irving, financial services partner at Browne Jacobson, agreed: ‘The failure to disclose a large commission can still be relevant when assessing the buyer’s or borrower’s rights under the CCA.
‘The court also confirmed that the intermediary’s financial interest, typically a commission, comes from the finance provider, not the buyer. This ruling could have implications for the insurance industry. It raises questions about whether insurance placements are comparable to these “three-cornered” structures, and whether there’s a shared understanding among insurers, policyholders, and the courts about who ultimately bears the cost of intermediary remuneration.
‘The market should also consider the claims ramifications from a potentially large volume of liabilities for car dealers in relation to CCA disputes.’
Guy Wilkes, partner at Mishcon de Reya, said: ‘We haven't seen the end of claims arising out of undisclosed commissions completely.’
The Financial Conduct Authority (FCA) has confirmed it will consult by October on a compensation scheme with pay-outs beginning in 2026, but said most consumers would receive less than £950.
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