Clifford Chance

As the Supreme Court hearing concerning motor finance commission arrangements approaches, the FCA has announced that if non-compliance and consequential consumer loss are found, an industry-wide redress scheme will likely be put in place.

In January 2024, the FCA launched its review examining whether consumers paid too much for car loans because of the use of discretionary commission arrangements ("DCAs").

Since then, the Court of Appeal in Johnson v Firstrand Bank Ltd, Wrench v Firstrand Bank Ltd and Hopcraft v Close Brothers Ltd has found that it was unlawful for car dealers to receive a commission from a lender providing motor finance to a customer unless it was disclosed to the customer, and they gave informed consent to the payment. The banks' appeal in relation to this ruling (the "Appeal") is due to be heard by the Supreme Court next week (on 1 to 3 April).

We have examined the background to the FCA's review, the litigation concerning DCAs and wider considerations for lenders in our previous Clifford Chance briefing.

On 11 March 2025, the FCA announced in a press release that, should the Supreme Court uphold the ruling, the FCA will likely propose an industry-wide redress scheme. This would require firms to identify and compensate affected customers directly, thus removing the need for customers to pursue complaints and claims to the Financial Ombudsman Service. 

What will happen next?

The FCA had indicated that it intended to provide an update in May 2025 about its proposed next steps in relation to motor finance.

It will now instead confirm within six weeks of the Supreme Court's decision if it intends to propose a redress scheme. In effect, this means that a decision will probably be communicated during summer 2025.