Supreme Court Ruling on Car Finance Scandal Poised to Impact Millions of Motorists and Banks

Published: 01 August 2025. The English Chronicle Online

A landmark Supreme Court decision on car finance is expected today in the United Kingdom, potentially carrying vast financial consequences for banks and affecting millions of motorists who purchased vehicles through financing deals. At the heart of the case is a question of transparency: should customers be fully informed about the commissions that car dealers earn when arranging finance on their behalf?

The Supreme Court’s focus is primarily on one of two intertwined legal battles concerning the mis-selling of car finance agreements, a controversy that has stirred widespread public attention and scrutiny of the financial practices in the auto sales industry.

When consumers purchase a car through finance agreements, they effectively take out a loan which they repay in monthly instalments, inclusive of interest. The brokers or dealers facilitating these finance plans receive a commission—a percentage cut from the interest paid by customers. The critical issue under review is whether customers were made aware of these commissions at the time of sale.

Last year, the Court of Appeal sided with three motorists who argued they had not been informed that dealerships were earning commissions of up to 25%, which were subsequently incorporated into the cost of their vehicle finance. The Court of Appeal deemed it unlawful for dealers to receive such payments without securing the explicit informed consent of customers. However, this ruling was challenged by lenders Close Brothers in the UK and South Africa’s FirstRand, prompting the case to be escalated to the Supreme Court.

Alongside this, a second related case, led by the Financial Conduct Authority (FCA), addresses the issue of discretionary commission arrangements (DCAs). Under these practices, brokers and dealers could adjust interest rates upward without informing buyers, thus earning higher commissions. The FCA banned such schemes in 2021 following growing complaints from consumers who alleged they had been unfairly overcharged prior to the ban.

The Financial Ombudsman Service revealed in May that it was handling some 20,000 complaints related to these practices. Since January 2024, the FCA has conducted a thorough review of historical motor finance commission agreements across various firms, all of whom deny wrongdoing. As part of this process, the FCA is also considering implementing a consumer redress scheme designed to offer compensation to affected customers.

Industry estimates suggest that up to 40% of motor finance deals between 2007 and 2021 may be eligible for compensation due to the use of DCAs during that period. This potential redress scheme could therefore represent a significant financial liability for lenders and brokers, as well as a crucial opportunity for motorists who may have been unfairly charged.

The Supreme Court ruling is widely anticipated to influence the scale and scope of any compensation arrangements that follow, although it will only directly address the issue of non-disclosure of commission and not the broader allegations of discretionary commission abuse.

For millions of motorists who have financed their vehicles over the past two decades, the outcome of today’s ruling may be pivotal in determining their rights and any financial recompense they might be entitled to. Meanwhile, banks and finance companies await the court’s decision with great interest, as it may set a precedent with lasting implications for the motor finance industry as a whole.

The English Chronicle Online will continue to monitor and report on developments as the Supreme Court’s judgement unfolds, offering detailed analysis of what it means for consumers and the wider financial sector.