As we enter the autumn, the next phase on motor finance commission issues begins. This note provides an overview of steps firms should consider taking to ensure they are prepared. As a reminder, on 1 August 2025, the Supreme Court handed down its much-anticipated judgment in the motor finance commission cases.¹ Whilst it found, in a welcome decision for finance firms, that the dealers did not owe a fiduciary duty to their customers (considered a necessary ingredient for claims in common law and equity), it held in one of the three appeals (Johnson) that the relationship between the customer and lender was unfair under section 140A of the Consumer Credit Act (1974) (CCA), leaving the door open for litigation and regulatory redress. Read our analysis here.

Shortly after the decision, the FCA announced it would consult on a redress scheme for customers who had been treated unfairly by motor finance firms. The consultation is to be published by early October 2025, with the FCA aiming to finalise the scheme such that customers begin to receive compensation in 2026. The FCA has indicated the consultation will consider how a range of factors tending to indicate an unfair relationship under the CCA (including those identified by the Supreme Court in Johnson such as the size of commission relative to the charge for credit, the customer's financial sophistication and the extent of disclosure in the underlying documents) should be assessed together when deciding on whether a relationship is unfair.

A key question for firms is how far back any scheme will go. The FCA has set out, in its response to the House of Lords Financial Services Regulation Committee's questions, that complaints from 2007 onwards could be eligible, on the basis that any deliberate concealment of commission could postpone limitation periods under the CCA.²

As we approach the October consultation, now is a key time for firms to step up their preparations. To be well positioned to tackle the next phases, firms should consider the following:

• Commission disclosure – Firms should review existing and historic commission structures: for existing structures, ensure all arrangements are properly documented, disclosed and explained to customers; for historic structures, ensure they have gathered evidence of past practices. The FCA has already expressed concern about widespread misconduct related to DCAs before the 2021 ban and so it will be important to be able to evidence practices.
• Consultation input – Firms should engage with the FCA consultation. Key issues which are likely to be addressed include:
  • inclusion of non-discretionary commission arrangements (non-DCA) cases in the scheme;
  • whether there is a threshold over which the size of commission will be unfair;
  • methods for calculating compensation – including a de minimis eligibility threshold and whether the appropriate payment is set at the level of the commission paid (as in Johnson), or some other methodology reflecting loss suffered;
  • how interest is to be calculated on any redress awards; and
  • whether the scheme will be opt-in or opt-out.
• Complaint handling – The FCA has extended the time firms have to respond to car finance commission complaint handling until after 4 December 2025 and may extend this deadline to align timing with the scheme. Firms should ensure resources are in place to handle complaints backlog and potentially high volumes of new complaints.
• Litigation risk – Whilst a structured scheme may offer a more consistent approach to resolving complaints than litigation, consumers can still bring claims under the CCA through the courts and may choose to do so where they consider the scheme does not compensate them adequately. Firms will therefore need to consider ongoing litigation risk. The pending appeal to the Court of Appeal in Angel and others v. Black Horse Ltd³ on whether unfair relationship claims can be brought using a single claim form⁴ may have a bearing on claim volumes and as such firms should keep an eye on the progress of the appeal.
• Impact of CMCs – The SRA and FCA have expressed concerns as to potential poor practices by claims management companies (CMCs) and law firms targeting motor finance customers, and the FCA has recently announced that it is launching a £1 million campaign to let motor finance customers know they do not need to use a CMC or law firm to access an industry-wide compensation scheme. Firms should ensure they are aware of the steps the FCA is taking in this area.
• Financial resilience – The FCA has estimated the total cost of the scheme to be between £9 billion and £18 billion, with "most individuals" to receive less than £950 per agreement. Firms should conduct their own assessment of their potential liabilities for both DCA and non-DCA agreements, not forgetting administrative costs. Firms are required under prudential rules to maintain adequate resources to cover this liability and therefore may want to look into possible funding and restructuring options. Where relevant, these potential liabilities should be properly disclosed to investors and the market.
• Operational resilience – Participating firms will need to process a large amount of customer data, especially with complaints potentially going back as far as 2007. Firms should assess whether specific resources need to be allocated and whether third-party support is required for data retrieval, analysis and project management.
• Directors' duties – Boards of directors will also need to take into account redress liabilities in the context of exercising their duties as directors. Duties to promote the success of the company, exercise independent judgement and exercise reasonable skill, care and due diligence will be especially relevant. Depending on a firm's financial position, directors' duties may need to be exercised with the interests of creditors in mind and, if solvency issues do arise, boards should seek appropriate advice on both their own duties as well as the wider position: early consideration of the position invariably maximises the availability of solutions and optimises outcomes.

1. Hopcraft v. Close Brothers Limited; Johnson v. FirstRand Bank Limited; Wrench v. FirstRand Bank Limited [2025] UKSC 33↩
2. Applying Canada Square Operations Ltd v. Potter [2023] UKSC 41↩
3. [2025] EWHC 490 (KB)↩
4. Under CPR 7.3↩