Home / Commission payments in car credit agreements – the impact on lenders
2nd April 2025
Abby Mercer, Solicitor
This week the Supreme Court is hearing the appeal as to what should happen when undisclosed commission is paid by lenders to dealers where the consumer is completely unaware of the payments being made.
The Judgment could have far-reaching implications for the lending industry, particularly in terms of consumer credit agreements and the enforceability of terms in relation to commission. This appeal will hear the case, Johnson v FirstRand, which determined commission payments made by lenders to car dealers providing motor finance to customers (in business to consumer contracts) where the amount and terms of that commission was either not disclosed to the customer or not sufficiently brought to the customer’s attention, were unlawful. The decision has the potential to open the door to claims against lenders potentially worth billions of pounds.
While the cases relate to the car finance market, the general principle, i.e., that brokers and lenders must declare any commission they are receiving in a transaction openly and plainly to consumers, and the consumers must give their informed consent to that commission, it is relevant to the lending market as a whole and is being called the ‘new PPI’ by some, as a ruling in favour of the consumer by the Supreme Court could open the floodgates to litigation in the finance and lending industry.
The FCA have got a financial redress scheme waiting in the wings. If the ruling goes in the way of consumers, the FCA may step in and have a scheme that consumers can apply to in order for the potential to have any wrongly claimed commission repaid.
The outcome of the case has the potential to reshape how lending institutions operate, influencing how they draft credit agreements, manage consumer protection, and navigate disputes in the future. The case could usher in a new era of stricter regulations, with lenders forced to adapt or risk facing increased scrutiny and litigation and as a result. If you have any questions, please get in touch with our dispute resolution team.