“PPI on Wheels”: Supreme Court decision in Johnson, Wrench & Hopcraft

In parallel, and leaving aside DCAs, a number of test cases progressed through the courts in relation to commission arrangements more broadly and the disclosure of those arrangements. The central issue in those cases was whether undisclosed or partially disclosed commissions paid by lenders to dealers constituted bribes or secret profits, which gave rise to claims by customers against lenders.

In October 2024, the Court of Appeal issued its judgment in Johnson, Wrench and Hopcraft in which it ruled in favour of the customers. The Court of Appeal held that the dealers owed fiduciary and “disinterested” duties to their customers and that undisclosed commissions constituted bribes or unauthorised profits, for which lenders were liable either directly or as dishonest assistants.  The Court of Appeal also upheld Mr Johnson’s claim under section 140A of the Consumer Credit Act 1974 (CCA), finding that his relationship with FirstRand was unfair.

For previous articles on these matters, please see:

The Supreme Court rejected the Court of Appeal’s findings on fiduciary and disinterested duties. It held that:

However, in relation to Mr Johnson’s claim under the CCA, the Supreme Court found that the relationship was unfair for three main reasons:

By ruling that car dealers do not owe fiduciary duties to consumers when arranging finance, the Supreme Court has effectively confined compensation claims in relation to commission arrangements to those based on “unfair relationships” under section 140A of the CCA. The Court emphasised that unfairness under section 140A is necessarily a balancing exercise, requiring a holistic assessment of the relationship between the parties. This reflects the Court’s view that customers would or should readily appreciate that dealers are not disinterested advisers but are acting in their own commercial interests. The decision will be welcomed with a sigh of relief by the car finance industry (and more broadly, by other analogous sectors) as it is likely to reduce significantly the estimated £44 billion in potential claims that were anticipated following the Court of Appeal’s judgment. Furthermore, dealers and lenders should now be able to estimate their maximum exposure.

Following the Supreme Court decision, on 3 August 2025, the FCA confirmed that it would consult on a scheme to compensate motor finance customers who have been treated unfairly. The scheme will cover DCAs, but the FCA will also consult on which non-discretionary commission arrangements should also be included. The consultation will also consider (among other matters): redress calculations; whether interest should be payable; the timeframe under consideration (the FCA’s current view being that the scheme should cover agreements dating back to 2007); whether the scheme should be opt in or opt out; and what constitutes a “high commission” for the purposes of an unfair relationship.

For more information, see the FCA’s statement: FCA to consult on a compensation scheme for motor finance customers | FCA

Commentary by the Vehicle Remarketing Association’s legal counsel noted that the FCA’s redress scheme may face challenges around evidencing claims, which could shape its final design. Determining what counts as adequate commission disclosure, excessive commission, or relevant consumer characteristics involves complex, fact-specific value judgments. These aren’t easily resolved by automated processes and will likely require qualified assessors, posing a significant operational challenge given the expected volume of claims.

The FCA is aiming to publish its consultation by early October, with the scheme launching next year.  In the meantime, the FCA has advised firms that they should refresh their estimates on potential liabilities, ensuring they cover both liability for compensation and administrative costs (but appreciating that there will remain a degree of uncertainty until a redress scheme is finalised). The FCA also stated that it welcomed the industry-led practices to enhance the information provided to customers following the Court of Appeal judgment last year, and indicated that these updated practices should continue.
In addition, many will be watching with interest the appeal in Clydesdale v FOS, which is listed to be heard in September this year.

The case concerns the judicial review of a decision by the FOS to uphold a complaint relating to a DCA, in which the FOS decided that an inadequate disclosure breached FCA rules and also resulted in an unfair relationship under the CCA. 

If you would like to speak to our team about any of the issues raised in this article, please do get in touch.