The Judgment: Dealers are not fiduciaries

At the heart of the case was the question of whether motor dealers owe a fiduciary duty to consumers when arranging car finance agreements, specifically those involving commission payments. In what will be seen as a watershed moment, the Supreme Court categorically ruled that they do not.

Car dealers, the Court held, are not acting for consumers in a fiduciary capacity. They are independent commercial entities with their own interests, often acting as credit brokers rather than agents for the customer. To suggest they owe fiduciary duties would be to fundamentally misunderstand the nature of their role.

This finding has substantial implications. It undermines the foundation upon which many large-scale claims had been constructed—namely, the notion that undisclosed commission arrangements amounted to breaches of duty giving rise to redress. As Lord Reed, President of the Supreme Court, articulated: this was a matter of disclosure and fairness, not fiduciary wrongdoing.

Bribery allegations dismissed

Equally significant was the Court’s approach to allegations of bribery. The idea that lenders had “bribed” dealers via commission payments was dismissed out of hand. Commission is a standard commercial practice, not a secret payment intended to induce wrongdoing.

The Court made clear that unless a commission agreement was structured in a particularly egregious and undisclosed way—rendering the resulting contract unfair under the Consumer Credit Act—it did not automatically constitute grounds for complaint.

This perspective is likely to put an end to many speculative claims that relied on hyperbole rather than legal substance.

A narrow door left open

That said, the judgment did not completely close the door to all consumer claims. The Supreme Court acknowledged one narrow set of circumstances, decided on its unique facts, where unfairness under Section 140A of the Consumer Credit Act might still arise.

Such claims, however, should be few and far between. The mass litigation model—driven by claims management companies (CMCs) and law firms eyeing billions in potential payouts— should have lost its oxygen.

Indeed, this judgment should be seen as a well-driven coach and horses through the earlier Court of Appeal decision. It represents, for the sector, a critical turning point: a correction in legal reasoning that protects legitimate commercial practice while still preserving protections for genuinely mistreated consumers.

What this means for the Automotive Sector

The implications for the automotive finance industry are profound. Dealers, lenders, and brokers can breathe a sigh of relief. The spectre of millions of claims—claims that often involved consumers perfectly content with their transactions—has receded.

We may also see a much-needed reduction in the volume of misleading car finance mis-selling advertisements. These have long encouraged consumers to pursue claims they didn’t truly understand, or for losses they hadn’t really suffered. This environment not only distorted public perception but risked making car finance more expensive and less accessible to future buyers.

It’s no exaggeration to say that the Supreme Court has helped stabilise a key element of the UK’s automotive and financial markets.

The FCA’s redress response: a work in progress

Following Friday’s ruling, the FCA issued a statement on Monday indicating it is considering a form of redress scheme. While this response was widely expected, implementing such a scheme is unlikely to be straightforward.

A key challenge will be how to distinguish valid claims from opportunistic ones. The FCA’s current estimate of £9–18 billion in possible payouts implies between 10–20 million claims—each potentially worth up to £950. Yet these numbers seem implausible, particularly given the evidential difficulties involved in resurrecting historic finance arrangements going back as far as 2007.

Another open question is whether the FCA will offer a digital self-service portal. This could empower consumers to make claims directly—without relying on CMCs, which often charge 30% or more in fees. However, for those consumers who’ve already signed up with such firms, there’s a catch: exit fees. Some face charges of up to £175 just to walk away, raising thorny questions about the enforceability and fairness of such contracts.

Commercial legal considerations

For those advising commercial clients—manufacturers, lenders, brokers, and dealership networks—the focus now shifts to operational risk management and regulatory response.

Key action points include:

• Reviewing historic commission arrangements to ensure they fall within acceptable transparency thresholds.
• Monitoring FCA guidance and any future scheme implementation, including obligations to participate or respond to consumer complaints.
• Preparing communications strategies to address existing customer queries and manage reputational risk.
• Auditing contracts with third-party claims handlers, particularly where indemnities or referral relationships may be implicated.
• Supporting internal teams in handling data subject access requests (DSARs) from consumers prompted by renewed public interest.

Looking ahead: FCA, CMCs and the Courts

The ball is now firmly in the FCA’s court but if it is not careful and gets the redress scheme wrong, it might find itself on the receiving end of unfairness claims, never mind the lenders and dealers

Final thoughts

This judgment is not just a victory for the motor finance industry—it’s a case study in the value of judicial common sense. By reaffirming the commercial realities of dealer-broker-lender relationships, the Supreme Court has set a precedent that should endure.

For commercial stakeholders in the automotive sector, the message is clear: conduct business with transparency, respond to regulation with diligence, but do not let unfounded litigation drive you off the road.

Jon Butler is a Partner in the Commercial Dispute Resolution team at Geldards LLP, specialising in contentious matters affecting the automotive, retail, and financial services sectors.