The UK Supreme Court has delivered a partial victory to car finance firms, sparing them a potential £44 billion compensation bill. In a ruling on Friday, a panel led by Lord Reed upheld only one consumer case, brought by Marcus Johnson, while rejecting two others that alleged commission payments to dealers were bribes or breached a duty of loyalty.
The decision overturns a controversial Court of Appeal ruling from October, which had suggested that nearly all commission arrangements were unlawful unless fully disclosed and consented to. That earlier ruling had raised the prospect of compensation for millions of motorists who bought cars on finance, with analysts estimating costs of up to £44 billion for lenders including Santander UK, Close Brothers, Barclays, and Lloyds.
Johnson expressed disappointment, telling the Guardian: “Even though I won, I just feel like it’s a dark day for the UK consumer.” However, the Financial Conduct Authority (FCA) said it would work through the weekend to determine next steps, potentially launching a more limited compensation scheme. The FCA aims to ensure fair compensation while maintaining a stable motor finance market, which around 2 million people rely on annually.
Martin Lewis, founder of MoneySavingExpert.com, urged consumers to “do nothing” until the FCA clarifies the scope of any scheme. He warned that using claims management firms could cost borrowers up to 30% of their payout. Lewis estimated that lenders might ultimately pay out £5-15 billion, with most recipients receiving hundreds rather than thousands of pounds. He noted that a larger bill could have pushed some firms into failure, leaving no compensation at all.
The case was brought by lenders Close Brothers and FirstRand, challenging the Court of Appeal’s broad interpretation of commission rules. The Supreme Court’s narrower ruling limits compensation to cases where commissions were not properly disclosed, potentially affecting fewer consumers than initially feared. Chancellor Rachel Reeves had previously considered intervening to prevent a “windfall” for borrowers, and the ruling may ease pressure on the government to legislate retrospectively.
