Lenders have avoided potentially having to pay compensation to millions of drivers, after the Supreme Court ruled they are not liable for hidden commission payments in car finance schemes, but some motorists may still receive payouts.
The UK’s highest court ruled that car dealers did not have a relationship with their customers that would require them to act “altruistically” in the customers’ interest.
The decision comes after two lenders, FirstRand Bank and Close Brothers, challenged a Court of Appeal ruling which found “secret” commission payments, paid by buyers to dealers as part of finance arrangements made before 2021, without the motorist’s fully informed consent, were unlawful.
The ruling in October last year found that three motorists, who all bought their cars before 2021, should receive compensation after they were not told either clearly enough or at all that the car dealers, acting as credit brokers, would receive a commission from the lenders for introducing business to them.
However, the Supreme Court judges said that some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA).
Key Points
- Millions set to miss out on car finance compensation after Supreme Court ruling
- FCA to announce car finance redress decision before markets open on Monday
- Martin Lewis urges drivers not to act yet after ruling
- How do I know if I was mis-sold car finance?
- Why is this court case so important?
Supreme Court car finance ruling: Martin Lewis issues urgent warning
23:39 , Jabed Ahmed
Martin Lewis issues urgent car finance Supreme Court ruling warning
How do I know if I was mis-sold car finance? Here’s everything to know
22:59 , Jabed AhmedOur Consumer Editor Sabrina Sahota explains:
How do I know if I was mis-sold car finance? Here’s everything to know
Recap | FCA to announce car finance redress decision before markets open on Monday
22:28 , Jabed AhmedThe financial watchdog has said it will confirm whether it will consult on a redress scheme for consumers with car loans before 8am on Monday 4 August.
A spokesperson for the Financial Conduct Authority (FCA) said: “We welcome that the Supreme Court has clarified the law and are grateful to the court for delivering the judgment after the market closed.
“It will take time to digest the judgment. We want to bring greater certainty for consumers, firms and investors as quickly as possible.
“We will be working through the weekend to analyse the judgment and determine our next steps.
“We said we would set out within six weeks whether we would consult on a redress scheme. But we want to provide clarity as quickly as possible.
“So, we will confirm whether we will consult on a redress scheme before markets open on Monday August 4.
“Our aims remain to ensure that consumers are fairly compensated and that the motor finance market works well, given around two million people rely on it every year to buy a car.
“If we do decide to propose a redress scheme, we’ll consult widely. In designing a redress scheme, as we have previously said, we will balance principles including fairness, timeliness and certainty.”
Watch | Martin Lewis explains car finance mis-selling case as Supreme Court to deliver verdict
21:59 , Jabed AhmedToday's key events at a glance
21:30 , Jabed AhmedThe Supreme Court ruled lenders are not liable for hidden commission payments in car finance deals before 2021, sparing them billions in potential payouts.
Judges found car dealers didn’t owe customers a duty to act purely in their interests — overturning a Court of Appeal ruling that could have opened mass compensation.
One driver, Marcus Johnson, won his case under the Consumer Credit Act and will get around £3,000 in commission plus interest.
The FCA will confirm by 8am Monday if it plans to consult on a redress scheme covering “discretionary commission arrangements”, which may still compensate drivers.
The Treasury said it would work with regulators and industry “to understand the impact” and is already reforming consumer credit rules.
Lawyers for the two other drivers called the decision “disappointing”, but vowed to keep fighting for compensation.
The judgment stressed that while dealers offered to find finance, they still pursued their own commercial interests.
Martin Lewis warned drivers to avoid claims firms, saying redress could come automatically if a scheme is introduced.
The FCA previously said almost 99 per cent of around 32 million car finance deals since 2007 involved broker commissions.
The court delivered its decision after markets closed to avoid “market disorder”
Car finance ruling leaves motorist involved in Supreme Court case ‘dumbfounded’
20:59 , Jabed Ahmed
Car finance ruling leaves motorist involved in Supreme Court case ‘dumbfounded’
Auto Express editor: Car finance claims still possible despite Supreme Court ruling
20:27 , Jabed AhmedPaul Barker, editor of Auto Express, said: “Today’s Supreme Court ruling – which found that car finance firms did not unlawfully mis-sell products simply by failing to disclose commissions – narrows the scope for car finance compensation claims, but it doesn’t eliminate them entirely.
“Anyone who signed up for a discretionary commission arrangement (DCA) between 2007 and 2021 should still be eligible for compensation; the FCA is expected to set out next steps regarding this ruling in the coming weeks.
“In the meantime, we strongly advise against using claims management firms, which often take a hefty cut of any compensation.
“Instead, there are free tools and official routes available to help you make a claim directly.
“And if the FCA introduces the mooted ‘opt-out’ scheme, you may not need to do anything at all – your lender will be required to contact you.
“Until then, sit tight, avoid unnecessary fees and keep an eye on updates from the regulator.”
Supreme Court ruling on car finance explained
19:58 , Jabed Ahmed
Martin Lewis: Don’t sign up to claims firms – redress could be automatic
19:41 , Jabed AhmedMartin Lewis has warned motorists to be patient following the Supreme Court’s ruling on hidden car finance commissions, and urged them not to rush into signing up with claims firms.
Speaking in a video posted to X, Mr Lewis said: “It is absolutely plausible you could get redress without even making a claim — so don’t sign up to a claims firm that’ll take a cut.”
He explained that the Financial Conduct Authority (FCA) is still expected to consult on launching a redress scheme for discretionary commission arrangements, covering car loans taken out before January 2021, where dealers or brokers secretly raised interest rates to boost commission.
If introduced, such a scheme could see millions automatically refunded, meaning claims firms might “do nothing” yet still take up to 30 per cent of any payout.
Mr Lewis added: “My biggest message: do nothing now. Sit on your hands and wait to see what the regulator announces.”
The FCA is due to confirm before Monday morning whether it will move ahead with plans to consult on the redress scheme.
Can you really afford car finance? A money editor’s guide
19:24 , Jabed Ahmed
Watch | What is the difference between PCP and HP car finance
18:59 , Jabed AhmedMartin Lewis: Car finance refunds likely to shrink after Supreme Court ruling
18:38 , Jabed AhmedMartin Lewis has said the Supreme Court’s decision means potential car finance refunds will now be far lower than first expected.
Posting on X, he said: “My assumption/guess is this will mean #CarFinance refunds will be in the £5bn to £15bn range now rather than the up to £45bn if #SupremeCourt had upheld all of it (and that's before looking at the potential knock on to other financial services sectors).”
Key differences between PCP and HP car finance explained
18:29 , Jabed AhmedSteve Fowler explains:
PCP vs HP car finance: Key differences explained by a motoring editor
FCA to announce car finance redress decision before markets open on Monday
18:18 , Jabed AhmedThe financial watchdog has said it will confirm whether it will consult on a redress scheme for consumers with car loans before 8am on Monday 4 August.
A spokesperson for the Financial Conduct Authority (FCA) said: “We welcome that the Supreme Court has clarified the law and are grateful to the court for delivering the judgment after the market closed.
“It will take time to digest the judgment. We want to bring greater certainty for consumers, firms and investors as quickly as possible.
“We will be working through the weekend to analyse the judgment and determine our next steps.
“We said we would set out within six weeks whether we would consult on a redress scheme. But we want to provide clarity as quickly as possible.
“So, we will confirm whether we will consult on a redress scheme before markets open on Monday August 4.
“Our aims remain to ensure that consumers are fairly compensated and that the motor finance market works well, given around two million people rely on it every year to buy a car.
“If we do decide to propose a redress scheme, we’ll consult widely. In designing a redress scheme, as we have previously said, we will balance principles including fairness, timeliness and certainty.”
Man who whose claim was not overturned was 'dumbfounded' by ruling
18:16 , Jabed AhmedMarcus Johnson said that he was “dumbfounded” by the Supreme Court ruling.
He said: “It is obviously not OK, my case was successful, but it sounds like it’s fine to secretly overcharge customers for commission.
“The current financial agreement on my current vehicle in the contract – because I have looked through it all since that contract – is all completely clear.
“I don’t disagree with commission. I now understand that that is how the market works.
“My case was a case of it being so secretive.”
When asked how he felt when he found out the result of the Supreme Court case, he said: “It was surprise and sadness, because I was quite confident, just based on how I felt about it, the unfairness of what happened to me.
“I thought people looking at all the information would come to the same conclusion and I’m just dumbfounded.
“I feel terrible that people won’t be able to claim anything like I have.”
Man who won claim says he would 'steer clear' of hire purchase agreements in the future
18:06 , Jabed AhmedMarcus Johnson, one of three drivers whose case was involved in the Supreme Court appeal, said the ruling “does not sit right”.
Mr Johnson, then a factory supervisor, was buying his first car in 2017 and paid £1,650.95 in commission as part of his finance agreement with FirstRand for the Suzuki he purchased.
The 35-year-old, from Cwmbran in Wales, was awarded his commission and interest by the Supreme Court on Friday as it found he was the victim of an “unfair” relationship between the customer and the lender.
Following the ruling, he said: “It does not sit right with me at all, to be honest.
“I am obviously happy that my case was successful, but for so many other people that were also overcharged, I just don’t like the message it sends to the UK consumer.”
Mr Johnson said the commission was around 25% of the cash price of the car and that he was repaid this figure with interest after the Court of Appeal’s ruling in October, meaning he received “just over £3,000”.
He added that he would “steer clear” of hire-purchase agreements in future.
Lawyer for dismissed drivers urges transparency in car finance loans
17:56 , Jabed AhmedKavon Hussain, the lawyer representing the two drivers whose cases were dismissed at the Supreme Court, said “transparency is key” for car finance loans, adding that he and his clients are “disappointed” in the justices’ decision.
Speaking outside the court, he said: “The lenders and car dealers now, if you go for a loan, usually on the first page they will say what the commission is that’s being paid to the brokers. They don’t hide it any more.
“In a sense, that’s some good that’s come out of this. They’re very keen to make sure consumers and even businesses know exactly how much commission they are paying.
“There has to be absolute transparency on the true cost of the loan. If there’s commission, make the client aware of it, don’t hide it somewhere on page 15.
“Transparency is key.”
How do I know if I was mis-sold car finance? Here’s everything to know
17:51 , Jabed AhmedOur Consumer Editor Sabrina Sahota explains:
How do I know if I was mis-sold car finance? Here’s everything to know
Expert warns lenders to review commissions despite Supreme Court ruling
17:47 , Jabed AhmedCaroline Wayman, Global Head of Financial Services at PA Consulting, has said lenders may “breathe a sigh of relief” after the Supreme Court ruling on hidden car finance commissions, but added it is a “wake-up call” for the industry.
She said firms “should scrutinise any large, undisclosed commissions” and ask “whether it still feels justifiable or could be considered unfair — particularly if they haven’t disclosed commercial ties to the broker.”
“It won’t be enough to expect customers to have read and understood the fine print,” she added.
The FCA’s ongoing probe means “this issue doesn’t just go away,” and the regulator “will need to decide whether a proactive scheme is the right way to address any harm”, Ms Wayman said.
The ruling also “raises a broader question about where the law ends and where regulation begins.”
National Franchised Dealers Association hails Supreme Court decision
17:35 , Jabed AhmedSue Robinson, chief executive of the National Franchised Dealers Association (NFDA), said: “We are pleased with the Supreme Court’s decision in relation to the FCA’s motor finance review.
“As the consumer-facing part of the sector, NFDA wants to see the regulator act fairly to ensure that UK consumers receive a satisfactory result. This has been achieved today.
“As we move forward from this case, NFDA will continue to provide support to its members ensuring that the UK has a healthy and functioning motor retail market.”
Lawyer: Ruling opens door for redress over unfair car finance deals
17:35 , Jabed AhmedRichard Coates, partner and head of automotive at law firm Freeths, said: “This is a significant judgment for lenders and dealers.
“As we predicted, whilst the Supreme Court found that dealers do not owe a fiduciary duty of trust and confidence when arranging car finance for their customers, the judgment opens the gateway for consumers to bring claims under the Consumer Credit Act, where particularly large commissions have been paid and the relationship is therefore unfair.
“It is anticipated that the FCA will bring redress for those cases where it is deemed that the relationship is unfair and we expect to learn more from the FCA about this redress scheme within the next six weeks.”
Financial services expert reacts to ruling
17:32 , Jabed AhmedSusannah Marsh, Partner in Financial Services Litigation at Moore Barlow, has said the Supreme Court ruling prevents what could have been the UK’s largest consumer compensation crisis since PPI.
However, she warned that the issue is far from over.
“The decision lifts the threat of billions in industry-wide payouts, allowing the Chancellor to pause any plans for retrospective legislation,” Ms Marsh said.
“The financial services sector can breathe a sigh of relief — but we’re not out of the woods yet.”
She noted that while the ruling will likely prevent mass litigation over hidden commissions, individual cases could still arise.
“Each case will depend on its facts. Motor brokers may still owe fiduciary duties in some circumstances,” Ms Marsh explained.
She added that claims management companies are expected to change their approach following the ruling.
She also highlighted that separate claims relating to discretionary commission arrangements (DCAs), which involved dealers secretly increasing interest rates on about 40 per cent of deals, will continue through the FCA’s regulatory route.
“While the big compensation windfall has gone, credit availability is protected, DCA victims will still receive redress, and litigation will continue. Lenders should act now to assess risk and prepare for future challenges.”
Campaigning MP condemns the 'truly shocking' scale of the scandal
17:24 , Kate DevlinLiberal Democrat MP Bobby Dean, who has campaigned on the motor finance scandal, said: "Today is a good day for the consumer and a lesson to industry that honesty matters. If you strike car loans on behalf of consumers, you must be totally up front about the commission you receive.
"The scale of the rip-off is truly shocking. Some people are overpaying interest by thousands of pounds. It is now on the Government and the regulator to ensure that people get the compensation they are owed."
Watch | Supreme court rules on car finance case to avoid 'market disorder'
17:23 , Jabed AhmedWhat does the ruling mean?
17:19 , Jabed AhmedMillions of drivers hoping for payouts over hidden car finance commissions have missed out after the Supreme Court ruled lenders are not liable for secret payments to car dealers on agreements made before 2021.
Only one motorist will get compensation after judges found his deal was unfair, while most claims were rejected. Here’s what it means:
- Most drivers won’t get compensation: lenders avoid potentially billions in payouts.
- Marcus Johnson’s case succeeded: he will get back the commission he paid, plus interest.
- FCA response expected: the watchdog may still announce within six weeks whether it plans a redress scheme.
- Martin Lewis warns: “DO NOT DO ANYTHING NOW. DO NOT SIGN UP TO A CLAIMS FIRM… just sit on your hands for now.”
- Treasury says it will work with regulators and industry to understand the impact.
Martin Lewis urges drivers not to act yet after ruling
17:15 , Jabed AhmedMartin Lewis has urged drivers not to rush to make claims or sign up to claims firms after the Supreme Court ruled lenders are not liable for hidden commission payments in car finance deals.
Posting on X, Mr Lewis wrote: “CAR FINANCE DO NOT DO ANYTHING NOW. DO NOT SIGN UP TO A CLAIMS FIRM. PLEASE SHARE.”
He added: “My suspicion is the FCA will within weeks announce consultation on a redress scheme for discretionary commission cases. You may not even have to claim it ,could be automatic. And with excessive commissions I suspect more guidance will come on that at a similar time.
“If you sign up to a claims firm now, you may have to give it a cut even if it does nothing. So just sit on your hands for now.”
Millions of motorists had hoped for payouts over “secret” commission arrangements used by car dealers and lenders before 2021.
The Supreme Court’s decision means the bulk of claims will not go ahead, but the Financial Conduct Authority has said it will announce within weeks if any compensation scheme will follow.
Treasury will work to 'understand the impact' of ruling
17:01 , Holly EvansThe Treasury has said it will work with the industry and regulators following Friday’s Supreme Court ruling.
A spokesperson said: “We respect this judgment from the Supreme Court and we will now work with regulators and industry to understand the impact for both firms and consumers.
“We recognise the issues this court case has highlighted. That is why we are already taking forward significant changes to the Financial Ombudsman Service and the Consumer Credit Act.
“These reforms will deliver a more consistent and predictable regulatory environment for businesses and consumers, while ensuring that products are sold to customers fairly and clearly.”
Millions set to miss out on car finance compensation after Supreme Court ruling
16:58 , Holly EvansLenders have avoided potentially having to pay compensation to millions of drivers after the Supreme Court ruled that they are not liable for hidden commission payments in car finance schemes.
Delivering the Supreme Court's ruling, Lord Reed says the court allows appeals brought by the finance companies.
However, he said that the court upholds Mr Johnson's claim "that the relationship between him and the finance company was unfair".
"We award him the amount of commission plus interest," Lord Reed says. The claims of the other two customers have been rejected.
Decision announced on Friday to avoid 'market disorder'
16:44 , Holly EvansThe ruling has begun and Lord Reed, Supreme Court President, has explained that he is handing down the ruling this late to avoid “market disorder”.
He explains they had been advised by the Financial Conduct Authority that the outcome of this appeal may affect the price of securities issued by companies involved in the car finance market.
He added: “The markets will need time to digest the judgement and consider its implications".
Supreme Court ruling under way
16:40 , Holly EvansThe judge at the Supreme Court has begun to deliver their ruling.
We’ll be bringing you all the latest updates.
Judgment due at 4.35pm
16:18 , Holly EvansLords Reed, Hodge, Lloyd-Jones, Briggs and Hamblen are due to hand down their ruling at 4.35pm on Friday.
If justices dismiss the challenge, it is unclear how many people could be entitled to compensation.
If they side with the lenders, then it is likely to significantly limit the scope of potential payouts to motorists.
The FCA has said it will confirm within six weeks of the judgment whether it is planning to launch a redress scheme.
Rachel Reeves 'considering intervening in car finance ruling'
16:03 , Holly EvansRachel Reeves is considering overruling the Supreme Court after lobbying by some of the UK’s biggest lenders, reports said last week.
The chancellor has been part of Treasury contingency plans which will be enforced if the three justices decide to uphold October’s appeal court ruling, which could see customers apply for billions in compensation .
According the The Guardian, Reeves and officials have discussed the possibility of intervening in the case, in a hope to slash the potential of a £44bn compensation bill for lenders such as Lloyds, Santander, Barclays and Close Brothers.
Lenders and motor finance companies set aside hundreds of millions
15:29 , Holly EvansThe motor finance industry is now facing a looming crisis over an upcoming court decision over the potential mis-selling of loans.
Companies like Close Brothers have been setting aside hundreds of millions of pounds over the last year amid estimates that lenders could be forced to foot a £30 billion compensation bill.
This could happen if the UK’s highest court, the Supreme Court, upholds a landmark ruling on hidden motor finance commission arrangements on Friday.
Credit ratings agency Moody’s also estimated that the compensation costs could hit £30 billion.
Last year, Close Brothers revealed plans to bolster its finances by £400 million and cut costs as it prepares for the impact of compensating people.
The chief executive of Lloyds, which earlier this year said it was setting aside £450 million to cover potential compensation costs, said the uncertainty was one of the biggest problems for the industry.
What could it mean for the wider industry?
15:03 , Holly EvansAbout 80 per cent of new cars are bought using motor finance in the UK – so the decision could have major consequences for this industry.
Mr Gibbard said: “The FCA has got to make sure the market is stabilised – this is the second biggest credit market outside of mortgages.
“This is more than provision of credit – this is people getting to work, taking somebody to hospital, taking the kids to the playground – so this is a real facilitator for the economy.
“I think there is a risk, but everybody is so acutely aware of that risk so hopefully it won’t have that disruptive effect.”
Mr Gibbard also said a decision could have “far-reaching consequences” with other parts of the financial services sector also potentially coming under pressure for commission payments on loans.
Martin Lewis warns: 'Do not sign up to claims firms'
14:40 , Holly EvansMartin Lewis has warned car owners to hold tight and to await the Supreme Court ruling before taking any action.
The money saving expert wrote on social media: “People asking me "what to do". The very strong answer right now is nothing.
“This will all play out tonight then likely over the next six weeks or so and then we'll have a good idea. Do not sign up to a claims firms. Don't do anything now.”
People asking me "what to do". The very strong answer right now is nothing. This will all play out tonight then likely over the next six weeks or so and then we'll have a good idea. Do not sign up to a claims firms. Don't do anything now. https://t.co/GJ7O0gjclj
— Martin Lewis (@MartinSLewis) August 1, 2025
Consumers could receive compensation if redress scheme announced
14:10 , Holly EvansIf the FCA decides to proceed with a redress scheme, it is likely to clarify what type of motor finance arrangements it applies to – and potentially include all deals where people were not told clearly enough, or at all, that the car dealer was receiving commission.
A scheme is intended to be simpler for consumers than making a direct complaint to providers.
The watchdog said it would expect “fewer consumers to rely on a claims management company, meaning they would keep all of any compensation they receive” and would be “more orderly and efficient for firms than a complaint-led approach”.
Mahesh Vara, a legal director for Shoosmiths, said a decision that secret commission payments were unlawful would “naturally be a boon to claimants firms and consumers”.
“I think this is one of the first large-scale consumer mis-selling “scandals” of the social media digital age,” he said.
“It’s now leading to a greater expectation of there being almost a guaranteed payment. That is what the FCA will have to consider.”
Adverts from claims management companies have sprung up significantly in the lead up to the court decision – but some regulators have been warning against using them as people may be charged for a service they ultimately do not need.
What does it mean for consumers?
13:50 , Holly EvansIf Supreme Court judges side with the claimants then it could mean that many people who took out a car loan before 2021 may be due a payout, although it is difficult to say at this point how many.
If it sides with the lenders, then it is likely to significantly limit the scope of potential payouts to motorists.
However, the FCA is still looking at compensation for potential mis-selling of some types of motor finance arrangements – known as discretionary commission arrangements (DCAs) – so this could go ahead regardless.
How can I claim compensation and am I eligible as Supreme Court prepares verdict?
13:30 , Holly EvansA highly anticipated Supreme Court judgment on Friday is set to bring clarity to the UK's car finance commission saga, with millions of motorists potentially due compensation.
The ruling follows a Court of Appeal decision last October and is expected to define how the law applies to motor finance arrangements.
Its ramifications extend across the financial services sector, promising significant implications for consumers, lenders, and the wider car finance market.
Read the full explainer here:
Car finance mis-selling: How can I claim compensation and am I eligible?
Why is this court case so important?
13:10 , Holly EvansWayne Gibbard, who leads the automotive finance practice at law firm Shoosmiths, said Friday’s Supreme Court decision will be “absolutely fundamental to what happens next” for the sector.
He said it will inform the scale of potential compensation for customers, which will be overseen by the UK’s Financial Conduct Authority (FCA).
The FCA previously said that, if it thinks there was widespread harm to consumers as a result of commission payments, then it could set up an industry-wide redress scheme.
It said it will confirm within six weeks of the Supreme Court judgment whether it is planning to launch such a scheme.
Mr Gibbard stressed that this response will be particularly important going forward.
He said: “People can make an informed decision – the query is around their harm, have they been mis-sold something?
“And I think that’s been absent in the conversation.”
Court ruling could have major impact on car and finance industry
12:46 , Holly EvansThe outcome of the ruling could have major consequences for the industry, with the FCA telling the Supreme Court last year that almost 99 per cent of the roughly 32 million car finance agreements entered into since 2007 involved a commission payment to a broker.
The three drivers who brought the court action, Marcus Johnson, Andrew Wrench and Amy Hopcraft, all used car dealers as brokers for finance arrangements for second-hand cars, all worth less than £10,000.
Only one finance option was presented to the motorists in each case, with the car dealers making a profit from the sale of the car and receiving commission from the lender.
The commission paid to dealers was affected by the interest rate on the loan.
The schemes were banned by the FCA in 2021, with the three drivers taking legal action individually between 2022 and 2023.
What is the background to the court case?
12:32 , Holly EvansThe Supreme Court – the UK’s highest court – is considering an appeal against a Court of Appeal ruling made in October last year, relating to three claimants who had each bought cars on credit.
In each case, the car dealer made a profit on the sale of the car but also received a commission from the lender for introducing the business to them – which the three claimants argued they did not know about.
The Court of Appeal found that “secret” commission payments, as part of finance arrangements made before 2021 without the motorist’s fully informed consent, were unlawful.
The lenders, FirstRand Bank and Close Brothers, are challenging that decision.
