The recent Supreme Court judgment in Johnson v FirstRand Bank has redrawn the boundaries of Car Finance Commission Claims. Craig Leigh, managing director of 8PP Barristers & Associates, explains the implications for legal practice and across the financial services sector.

On 1 August 2025, the Supreme Court delivered its long-anticipated judgment in Johnson v FirstRand Bank and the conjoined appeals of Hopcraft and Wrench. The ruling addressed a central consumer credit issue: whether undisclosed or partially disclosed commissions in motor finance agreements create liability for lenders under civil bribery, equity, or under the Consumer Credit Act 1974 (CCA).

The Court decisively overturned key aspects of the Court of Appeal’s 2024 decision, reshaping the boundaries of consumer protection and lenders’ liability. For practitioners, the case has immediate consequences for claims strategy, disclosure obligations, and cost recovery. For in-house counsel, it signals a need to review practices and prepare for the potential fall-out of an industry-wide redress scheme.

The case is a watershed moment: it redefines disclosure obligations, informs litigation strategy, and underscores the importance of regulatory foresight.

The core issues before the Court

The Supreme Court considered four central areas: civil bribery; fiduciary duties; disclosure and informed consent; and disgorgement of profits.

• Civil bribery: The Court rejected lenders’ attempts to abolish the tort of bribery but narrowed its application. Liability now only arises where a genuine fiduciary relationship exists; impartial advice alone is insufficient.
• Fiduciary duties: The Court held that car dealers arranging hire-purchase agreements do not generally owe fiduciary duties to consumers. Dealers remain sellers acting commercially. This extinguishes one of the most expansive liability bases from the lower courts.
• Disclosure and informed consent: The Court confirmed that vague or partial references to commissions are insufficient. Full disclosure of all material facts is required. The decision abolishes the “half-secret vs secret” distinction and will reverberate beyond motor finance into mortgages, secured lending and other sectors where brokers act for consumers or businesses.
• Disgorgement of profits: The Court preserved the common law remedy of rescission and the right to recover bribes in full where a fiduciary duty exists. By limiting the application to a relationship that has fiduciary status, the scope of this remedy has been curtailed.

In Mr Johnson’s case the Court found that the combination of a significant undisclosed commission (£1,650.95 - over 25% of the vehicle’s price and 55% of the interest), inadequate disclosure, and the hidden commercial tie between the dealer and FirstRand created an “unfair relationship” under section 140A CCA. His claim succeeded on statutory grounds, even as the bribery and equitable claims failed.

Financial fall-out: billions at stake

The implications are vast. Consumer groups welcomed the statutory redress route, with Alex Neill of Consumer Voice commenting, “This ruling doesn’t let lenders off the hook. Billions are still owed to consumers who were unfairly charged.”

For lenders, the judgment was a relief compared to the catastrophic exposure once feared. Major banks had collectively set aside over £1.5bn in anticipation of claims.

Lender liability is still likely to eclipse the £1.5bn currently reserved.

By closing off fiduciary and equitable claims, the Court has averted a PPI-style wave of litigation. But lender liability is still likely to eclipse the £1.5bn currently reserved.

The Financial Conduct Authority (FCA) has already announced it will consult on an industry-wide redress scheme this year. Depending on its design, the scheme could crystallise multi-billion-pound exposures across the sector.

For claimant firms, the focus now shifts firmly to CCA unfair relationship claims. The judgment provides a clear statutory framework on which to build cases but it also raises new challenges on proportionality and costs recovery.

Implications for practitioners

For litigation lawyers, the decision re-routes claim strategies. Where fiduciary-based bribery claims once seemed promising, the statutory CCA route is now the mainstay. This has practical consequences:

• Recoverability: Many claims involve modest sums, raising questions of proportionately, cost recovery and small claims allocation.
• Funding arrangements: Firms are likely to see increased reliance on CFAs and DBAs to support group or test cases. The economics of running smaller claims individually may be prohibitive without collective mechanisms.
• Access to justice: While the statutory route is viable, individual consumers may still struggle to pursue claims without broader funding and coordination. Expect greater use of group actions and litigation funders.

For practitioners defending lenders, disclosure obligations will need fresh scrutiny. Advising clients on what constitutes “material facts” will be a key area of risk management.

What in-house counsel should be watching

The judgment has ramifications far beyond motor finance. In-house counsel across the financial services sector should prioritise:

• Commission structures: Audit current practices to ensure full disclosure of commissions and ties. Half-measures will not withstand scrutiny.
• Regulatory exposure: Monitor the FCA’s forthcoming consultation closely. A mandatory redress scheme could impose significant operational and financial burdens.
• Cross-sector impact: Mortgage brokers, secured lending providers and other credit intermediaries face potential scrutiny where commission practices mirror those examined in Johnson.
• Client preparedness: Businesses must be ready to respond to compensation claims, regulatory demands, and reputational challenges.

Conclusion

The Supreme Court has redrawn the boundaries of liability in commission-based motor finance. Fiduciary and equitable claims have been curtailed but statutory remedies under the Consumer Credit Act remain potent.

For consumers, the decision provides a clear, if narrower, path to redress. For lenders, the judgment averts a systemic crisis but leaves billions in potential liabilities.

For lawyers, both in practice and in-house, the case is a watershed moment: it redefines disclosure obligations, informs litigation strategy, and underscores the importance of regulatory foresight.

With the FCA poised to act, the landscape for consumer credit litigation and compliance is about to shift once again.

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