The UK Supreme Court has agreed to review a pivotal appeal concerning motor finance commission practices, setting the stage for hearings during the Hilary Term, which runs from 13 January to 16 April 2025.

The case, referred to as Johnson, challenges a Court of Appeal decision that deemed it unlawful for car dealerships acting as brokers to accept commissions from finance lenders without fully disclosing the arrangement to customers and obtaining their informed consent. The ruling has raised significant concerns within the motor finance sector, particularly for discretionary and non-discretionary commission models.

The Financial Conduct Authority (FCA) has expressed support for the Supreme Court’s swift decision to take on the case. Recognizing the potential implications for the motor finance industry and its consumers, the FCA emphasized the importance of a timely resolution.

In its official statement, the FCA noted: “The Supreme Court’s acceptance of this appeal is a vital step toward clarity in the motor finance sector. We are assessing whether to formally contribute to the case to share our expertise. Additionally, we are considering extending the timeframe for firms to respond to complaints related to non-discretionary commission arrangements while taking the court’s proceedings into account.”

During a recent appearance on ITV’s Money Live, FCA Chief Executive Nikhil Rathi suggested that a consumer redress scheme might be implemented, further signaling the regulator’s proactive stance on addressing the issue.

Analysts from S&P Global estimate that potential compensation costs could range between 6 billion and 44 billion pounds if the Supreme Court upholds the appellate court’s decision. Charlie Nunn, CEO of Lloyds Bank, which has significant exposure through its Black Horse Finance subsidiary, highlighted broader concerns about regulatory uncertainty. At the FT Global Banking Summit, Nunn remarked, “This trend of courts making rulings that result in retrospective economic impacts is becoming a systemic issue across various sectors.”

The upcoming Supreme Court hearing is anticipated to serve as a landmark case for the motor finance sector. It has the potential to reshape commission practices and offer essential clarity for both enterprises and consumers. The ruling could profoundly influence the future regulatory landscape of motor finance in the United Kingdom.