UK Supreme Court Decision on Car Finance Claims: The Truth

Apply Now

The Supreme Court Judgment Is Out – But It’s Not What The Headlines Said.

The UK Supreme Court delivered the final court judgment on the car finance scandal on Friday 1 August 2025, and if you’ve been reading the headlines, you might think it’s game over for car finance claims after the Court of Appeal decision was overturned in part. But here’s the truth: the door is far from closed for many, and car finance mis-selling will likely represent the biggest consumer scandal since PPI.

The Supreme Court made its final ruling after markets closed on Friday afternoon. Lord Reed, the Supreme Court President, announced they’d deliberately chosen this timing on advice from the Financial Conduct Authority to avoid market chaos. That alone tells you how big this is.

The Cases That Led to This Moment: Johnson, Wrench, and Hopcroft

All three borrowers had car finance deals where the dealer was being paid by the lender, but the borrower either didn’t know or wasn’t properly told. The difference was how the commission worked, how visible (or hidden) it was, and what legal route each case actually took.

Mr Hopcraft bought a Mercedes C220 on finance from Close Brothers. His dealer had a Discretionary Commission Arrangement (DCA) – it could move the interest rate within a band to boost its own cut. The hidden commission was about £3,317, almost half the interest he paid. He didn’t run a standalone “unfair deal” case; he said the dealer owed him a fiduciary duty (a duty to act in his best interests) and that the secret commission breached that duty or amounted to bribery.

Mr Wrench bought a Vauxhall Astra using Black Horse finance. That was also a DCA. The dealer got £678, vaguely referenced in paperwork (partial disclosure) but never properly explained. He made the same core complaints – breach of fiduciary duty and a bribery-style conflict – and had an unfairness point under Section 140A earlier in the process, but that wasn’t properly resolved below and crucially was not carried through to the Supreme Court, so it fell away and was not considered in the Supreme Court.

Mr Johnson’s MotoNovo Finance claim revolved around his 2017 purchase of a used Suzuki Swift under a hire purchase agreement worth approximately £4,600, arranged by Trade Centre Wales. Unknown to Johnson, the dealership earned a concealed revenue share commission of around 25%, or about £1,150, embedded within the interest he paid. This hidden commission inflated Johnson’s overall interest charges by roughly £1,650—equivalent to nearly 70% of his total cost of credit. Johnson argued that the undisclosed commission created an unfair credit relationship under Section 140A of the Consumer Credit Act, as the dealer had not properly disclosed their significant financial interest.

So What Did the Supreme Court Actually Decide?

After hearing the arguments from all sides, the Supreme Court made some key decisions:

First, they rejected the idea that car dealers owe consumers a “fiduciary duty.” This was a central argument in cases like Mr. Wrench’s, where it was suggested that dealers should act like financial advisors, always putting the customer’s best interests first. The Court clarified that car dealers are businesses selling cars for profit, not independent advisors. So, they don’t have this special legal duty to you.

Second, they threw out the “bribery” argument. This was another key point in cases like Mr. Wrench’s and the Hopcrafts’, where the Court of Appeal had suggested that hidden commission payments were like bribes. The UK Supreme Court disagreed, stating that you can’t have bribery without that fiduciary duty in the first place. Since they ruled there was no fiduciary duty, the bribery argument also fell away.

Third, and here’s what really matters, they still found that Marcus Johnson’s car finance agreement was unfair and ordered the FirstRand Bank (Motonovo) to pay him back his commission plus interest. This was a significant win for consumers, showing that even without fiduciary duty or bribery, an agreement can still be deemed unfair under Section 140A of the Consumer Credit Act.

Marcus Johnson & His Legal Team Pave The Way For Mass Car Finance Compensation

Unlike the other 2 cases (Wrench and Hopcroft) heard by the Supreme Court, Johnson’s claim was specifically considered under the Section 140A of the Consumer Credit Act 1974 test. The Wrench and Hopcroft cases, to the contrary, were primarily based on arguments of bribery and dishonest assistance.

Section 140A of the Consumer Credit Act 1974 is about protecting borrowers from unfair relationships with lenders. In simple terms, this means if you have a loan or credit agreement, and you feel something about it wasn’t fair – maybe the lender charged excessive interest, didn’t explain the terms properly, or behaved unfairly – you can challenge it.

And the great news is Johnson proved before the Supreme Court that Motonovo should pay compensation. In finding his agreement was unfair, the Court found Johnson’s claim was valid because of the significant undisclosed commission – around 25% of the loan amount (£1,150) – that MotoNovo Finance paid the dealership under a revenue share agreement, hidden from Johnson at the point of sale. This unclear arrangement inflated Johnson’s interest payments significantly (by about £1,650), making the credit terms disproportionately costly in turn.

Also, the Court concluded that the dealership’s generic, vague references buried in small print didn’t amount to adequate disclosure. Johnson had no meaningful choice or transparency, as the dealer presented him with just one finance option, effectively eliminating competition.

These factors combined to establish an unfair relationship under Section 140A of the Consumer Credit Act, as Johnson was unable to make an informed decision about the true costs and incentives embedded in his finance agreement.

The Five Factors Identified By The Supreme Court in the Johnson Case That Could Win Your Car Finance Claim Under Section 140A of the Consumer Credit Act 1974.

The Supreme Court identified five key factors that determine whether your car loan was unfair due to commission (mis-selling):

1. The size of the commission – Mr Johnson’s was massive: 25% of what he borrowed and 55% of the total interest charges
2. Whether it was a discretionary commission arrangement (DCA) – where dealers could bump up your rate to earn more
3. Customer vulnerability – were you in a position to understand what was happening?
4. How the commission was disclosed – buried in small print doesn’t count
5. Whether proper rules were followed – did they comply with FCA regulations?

Johnson won because his commission was so large it made the whole relationship unfair. And if Mr Johnson can successfully claim under these rules, so can many other consumers. At Allegiant, we’ve seen enough car finance agreements to know that Johnson’s arrangement with MotoNovo was not a one-off.

And Here’s The Bit The Press Missed (and It’s a Bombshell): Under the Johnson 5 Factors Test, Hopcroft (and Possibly Wrench) May Have Succeeded Too!

The kicker for Hopcroft and Wrench is that the Supreme Court did not consider their cases on the same basis as Johnson’s successful case.

Arguably, if Wrench’s case had been argued on the same five-factor, fact-sensitive test as Johnson’s (disclosure, vulnerability, discretionary incentives, commission size and overall distortion), it might have squeaked over the line, albeit less robustly given the smaller and partially disclosed commission.

Hopcroft, with a large fully concealed discretionary commission arrangement, in our view would likely would have won too.

£Billions Still on the Table – Whatever the Headlines Said.

Don’t believe the doom and gloom headlines. Here’s what the experts are really saying about compensation after the Supreme Court ruling:

Despite the Supreme Court narrowing the scope of claims, the numbers remain staggering. Martin Lewis predicted post-ruling that compensation will still run between £5 billion and £15 billion, primarily from discretionary commission arrangements.

Banks had already provisioned billions before the ruling:

• Lloyds Banking Group: £1.15 billion
• Close Brothers: £295 million
• Santander UK: £165 million
• Barclays: £95 million

Pre-ruling estimates suggested even higher exposure, with Bank of America analysts estimating £24-38 billion and RBC Capital Markets projecting £11 billion total impact. Some analysts are estimating total redress could still exceed £15 billion after the Supreme Court decision.

Your Car Finance Claim: Two Bites at the Cherry

Here’s the really important bit that’s being buried in the coverage: this Supreme Court decision only deals with one type of claim. There’s a whole other avenue still wide open.

First: The Unfairness Test Backed by the Supreme Court

Following Mr Johnson’s successful claim, if your car finance had any of these red flags, you could still claim under Section 140A of the Consumer Credit Act 1974:

• High commission
• Commission that wasn’t clearly explained to you
• Being told you were getting the “best deal” when the dealer was actually bumping up your rate

Second: The FCA’s Freestanding Discretionary Commission Arrangement Investigation.

This is the big one. The Supreme Court decision doesn’t directly touch the FCA’s separate investigation into discretionary commission arrangements. The FCA has extended the pause to the deadline for motor finance firms to provide a final response to customer complaints regarding discretionary commission arrangements (DCA) until 4 December 2025.

Between 2007 and 2021, dealers would often increase your interest rate to boost their commission. The FCA has already said this was wrong and is working on a compensation scheme. This adds a whole new category of loans under scrutiny – on top of what the Supreme Court decided.

Summary: What the Court Really Said (The Truth Behind The Headlines)

What the Court actually said was that dealers don’t automatically owe you compensation just because they got commission and you weren’t told about it properly.

But – and it’s a big but – the Court said they absolutely can owe you compensation if the relationship was unfair. Lord Reed said that non-disclosure or a partial disclosure by dealers of the existence of a commission did not necessarily make the relationship between a customer and a lender unfair. The key word there? “Necessarily”. It means it still can be unfair – you just need to show why using those five factors.

The Court was crystal clear: each case turns on its own facts. If your commission was excessive, hidden, or you were vulnerable, you could still have a valid claim.

The Numbers Don’t Lie: It’s Not the End, We’re Just at the End of the Beginning

The truth is, this Supreme Court decision isn’t the end of car finance claims – it’s the “end of the beginning”. With the FCA’s DCA announcement still to come, and clear grounds for unfairness claims established, we’re still looking at one of the biggest consumer compensation exercises in UK history, one that merits the attention of the whole population.

The FCA has committed to making an urgent announcement before markets open on Monday 4 August 2025. The FCA confirmed it will “confirm whether we will consult on a redress scheme before markets open on Monday.” The FCA is sat on substantial evidence of wrongdoing in the car finance market – they are on record as having said so. Martin Lewis confirmed that “billions are still likely to be paid out” despite the Supreme Court narrowing the scope.

What Should You Do About Your Car Finance Claim? Right now, you’ve got options. The Supreme Court has made it clear that unfair relationships can still lead to compensation, just like Mr Johnson’s case. But proving unfairness isn’t always straightforward.

You can absolutely pursue a car finance claim yourself – it’s free to complain directly to your lender, and if they say no, you can take it to the Financial Ombudsman Service without paying a penny. Some people prefer to wait for the FCA’s announcement on DCAs, which could make claiming simpler.

But here’s the thing: with potentially billions in compensation at stake, lenders won’t make this easy. That’s where professional claims representatives can help.

Get Back What’s Yours.

Don’t let misleading headlines put you off. This Supreme Court decision hasn’t ended car finance claims – it’s given consumer representatives a roadmap for winning them. Whether you want to claim now or wait for the FCA announcement, don’t be put off investigating your potential entitlement. The vast majority of consumers should still scrutinise their car loan carefully following the decision of the UK’s highest court on Friday