Anyone connected to the Motor Finance industry would have breathed a sigh of relief last Friday afternoon, as the Supreme Court largely overturned the previous Court of Appeal ruling on “hidden commissions”. While the verdict provided clarity, it was not a complete win for the lenders.
In this blog, Katie Stones discusses what this means now for motor finance firms.
Background to the motor finance commission case
There are two kinds of motor finance mis-selling that are being reviewed by the Financial Conduct Authority and the courts:
- Discretionary Commission Arrangements (DCAs), where dealers could increase the interest rate a customer paid on their car loan in return for more commission. These were banned by the FCA in 2021, and were not a specific part of the Supreme Court case.
- Undisclosed Commissions – the Court of Appeal had ruled that if car finance agreements didn’t make it clear that dealers were being paid a commission, then the agreement was unlawful. This is the question before the Supreme Court, and if the Court of Appeal’s judgement had been upheld, it could have opened the door to a massive compensation scheme costing the industry £billions.
Many commentators believe that even if the Supreme Court had fully upheld the Court of Appeal’s decision, the Government was likely to intervene to block any “PPI-style” redress due to the likely damage to the motor finance industry, and potential knock-on effects to similar types of finance, such as retailers selling household appliances with credit options.
So in a way, nothing has changed. But we now have certainty, which is reflected in the stock market’s response – shares in key motor finance lenders Lloyds and Close Brothers surged on Monday following the ruling.
What the Supreme Court ruling means for future complaints and what’s next for DCAs
Lenders will, however, be anxiously awaiting the FCA’s response to the specific complaint that the Supreme Court upheld. In this case, the commission was so large – 55% of the overall cost of credit – that the Court deemed the relationship between the lender and the customer to be “unfair”.
This could pave the way for other customers, and indeed Claims Management Companies, to bring forward more cases of similarly excessive commissions. So while there won’t be a mass-scale redress for all undisclosed commission cases, the regulator has stated they will “need to consider what size of commission in the context of the overall finance arrangements may point towards unfairness if not disclosed”, to bring consistency across the industry.
FCA redress plans for DCAs are still on the way
Meanwhile, back to DCAs: the FCA announced early last year that it was investigating this kind of mis-selling, and has now announced it will consult on an industry-wide redress scheme. While the Supreme Court case was not specifically about DCAs, the FCA was waiting for this verdict, in case it mentioned anything that could affect the plans for DCA redress.
At this stage, nothing has come to light, but the FCA will be working through all the details of the Supreme Court’s judgement before publishing the consultation paper in October. It is likely to be open for 6 weeks, intending to finalise the rules such that the scheme can launch in 2026.
Industry tensions continue
The Finance and Leasing Association (FLA) has already raised concerns that going back to 2007 will be “challenging”, as lenders may not have kept the relevant documents that far back. In response, the FCA has dismissed these comments — saying they acknowledge it will be difficult, but that lenders need to stop “haggling” and instead focus on helping consumers and working together with the Regulator to get things moving quickly.
These tensions between the lending bodies and the regulator are keeping the subject topical, generating more publicity and raising awareness amongst consumers.
Preparing for what’s next
The FCA is now advising firms to refresh their estimates of potential liabilities, as both the excessive commission ruling and the upcoming DCA consultation may impact future financial exposures.
We’re already helping motor finance clients navigate this — from reviewing historical exposure and pressure-testing liability estimates, to developing robust governance frameworks and preparing for regulatory engagement.
If you're reassessing your position or preparing for the October consultation, we can help you take a consistent, evidence-based approach.⬇
Motor finance redress: How to move forward
At Jaywing, we’re working closely with motor finance lenders to assess potential exposure, quantify financial impact, and develop redress strategies that are clear, consistent and operationally sound.
We’ve supported large-scale remediation programmes involving:
- Millions of customers and 20+ data platforms
- Fragmented or decommissioned legacy systems
- Complex cases, including deceased, bankrupt or sold accounts
Our approach blends technical redress expertise with deep sector knowledge, helping clients take a conservative, well-documented stance while keeping day-to-day operations on track.
We can support you with:
- Estimating redress liabilities and pressure-testing assumptions
- Pinpointing affected customer groups using historic data
- Designing and validating redress calculations
- Ensuring delivery with audit-ready governance and controls
- Supplementing analytical capacity to protect BAU
Whether you're starting to scope redress or need reassurance on your existing plans, we're here to help.
Book a free consultation with Jaywing’s redress experts.