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UK Supreme Court Judgment on Car Finance Agreements Could Reshape Motor Finance Industry
The upcoming ruling by the UK Supreme Court on car finance agreements could bring significant changes to the motor finance industry, according to legal experts at White & Case.
The judgment, set to be delivered in August 2025, will decide whether millions of historical car finance agreements did not contain the necessary disclosures regarding discretionary commission arrangements. If the court rules in favour of such claims, the industry could face a wave of consequences, including increased claims of mis-selling, regulatory scrutiny, and the potential need for widespread redress schemes.
Tom Falkus, a partner in White & Case's Fintech service area, Financial Institutions, Derivatives, and Financial Restructuring and Insolvency, commented on the potential implications of the ruling. "The Supreme Court's August 2025 ruling in Johnson v FirstRand Bank Ltd clarified that dealers have fiduciary duties to customers regarding disclosure of commission in finance agreements," Falkus said. "Insufficient disclosure can render commissions unauthorized profits and breach fiduciary duties."
This clarification raises the possibility that historical agreements where such discretionary commissions were not fully disclosed might be subject to legal challenge. The Financial Conduct Authority (FCA) has already signaled it may consult on an industry-wide redress scheme for mis-sold car finance agreements, especially if the ruling confirms widespread unlawful commission practices.
Hyder Jumabhoy, another partner at White & Case and Global Co-head of the Firm's Financial Institutions Industry Group and EMEA Co-head of the Financial Services M&A Practice, added that the ruling could also encourage car manufacturers to take a more active role in providing finance. "Large vehicle manufacturers have the balance sheet to support active involvement in financing," Jumabhoy noted.
Jumabhoy also pointed out that car manufacturers would be concerned about a lack of financing affecting car sales. "The potential lack of financing in the market could cause concerns for car manufacturers about the availability of buyers for their cars," he said.
White & Case, with its service areas in Western Europe and the United Kingdom for Financial Institutions, is closely monitoring the situation. The firm offers services in multiple areas, including Financial Institutions, Mergers & Acquisitions, Fintech, Capital Markets, Financial Restructuring and Insolvency, Derivatives, and Fund Finance.
Recently, Hyder Jumabhoy was quoted in The Telegraph discussing the UK Supreme Court's imminent judgment on car finance agreements. As the industry eagerly awaits the court's decision, it seems clear that the ruling could trigger extensive compensatory claims, provoke FCA-led redress consultations, and prompt systemic changes in the UK motor finance sector’s retail financial service practices to ensure full transparency and compliance with fiduciary and consumer law obligations.
- The upcoming Supreme Court ruling on car finance agreements, set for August 2025, could lead to a wave of consequences in the motor finance industry, as suggested by legal experts at White & Case.
- If the court rules in favour of claims about insufficient disclosure of discretionary commissions, it could potentially trigger extensive compensatory claims and regulatory scrutiny within the industry.
- Tom Falkus, a partner at White & Case, mentioned that such insufficient disclosure could render commissions unauthorized profits and breach fiduciary duties, raising the possibility of legal challenges on historical agreements.
- Hyder Jumabhoy, another partner at White & Case, commented on the potential for car manufacturers to take a more active role in providing finance, due to their balance sheets supporting such involvement.
- The potential lack of financing in the market could cause concerns for car manufacturers about the availability of buyers for their cars, as noted by Jumabhoy.
- White & Case, with its service areas in Western Europe and the UK for Financial Institutions, is carefully watching the situation and offers services in multiple sectors, including Mergers & Acquisitions, Fintech, Capital Markets, and Financial Restructuring and Insolvency.
