The Supreme Court’s Ruling on Car Finance and What it Means for Our Industry

Mathew Stonley, Head of DealTrak 

I’ve been reflecting on the Supreme Court judgment in Hopcraft v Wrench and Johnson v FirstRand Bank since it was published on Friday 1 August and thinking about how it might impact DealTrak and our clients and partners, as well as the wider industry. Today’s piece highlights the main findings of the decision, and a few action points for car dealers and finance brokers to consider post-judgment.  

The Matter of Fiduciary Duty 

The Supreme Court largely overturned the Court of Appeal’s decision stating that car dealers had a fiduciary duty to their customers.  Whilst the relationship between the car dealer (or finance broker) and the consumer is important and should be built on trust and good reputation, it does not extend to any formal kind of fiduciary duty.  

This decision also impacts any claims of bribery as bribery cannot be considered without the presence of a fiduciary duty, meaning that any claims relating to bribery or ‘secret’ commissions were quashed.  

Financial Sophistication  

The ruling will mean that claims relating to unfair relationships are still viable, and I expect to see Claims Management Companies look to test this fully as they pivot from their original plans. The success of Mr Johnson’s case (forming part of the overall judgment) was partly founded upon the concept of a lack of financial sophistication. Whilst it sounds like one, being financially unsophisticated is not a legal insult. It reflects the fact that some car buyers might not hold the knowledge or understanding of financial products to recognise when they should question the structure of a finance deal.  

For dealers and brokers, this means that the bar for education and understanding must be higher when they’re dealing with someone of little prior experience with finance. Essentially, dealers need to stick to the four outcomes outlined in the Consumer Duty and double-down on the Customer Understanding part.  

I have also noted several calls from industry experts urging dealers and brokers to prominently declare any commercial relationship they have with lenders, and the need to clearly disclose the receipt of commission for brokering a finance proposal. Having the right F&I software in place  can help with this. 

A Formal Redress Scheme 

As a result of the judgment, the FCA has announced that they will consult ahead of a formal redress scheme to begin in 2026, although the scope of this is due to be far lower than the £44bn that was originally predicted, suggestion that it will be in the £9bn - £18bn range. The regulator has stated that individual claimants are likely to receive less than £950 compensation per agreement. This could reduce the appetite for claims management companies operating on a ‘no win, no fee’ model. The conduct of some has become increasingly worrying throughout recent class actions, notably the breach of emissions regulation which started in 2015.  Again, time will tell how they look to pivot their business models to reflect this change. 

The consultation with cover 6 main areas, including:  

1. How a range of factors must be assessed when deciding on whether the relationship between the lender and consumer was unfair 

2. Whether non-DCA arrangements will fall within scope of redress 

3. Redress calculation 

4. Whether the redress with run as an opt-in or opt-out scheme 

5. What qualifies as ‘high’ commission 

6. Complaints deadline 

What Does it Mean for You, Now? 

Whilst the industry awaits the outcome of the FCA’s consultation due to be published on 4 December 2025, there are some actions to be taken before then.  

To better help consumer understanding of the finance products you offer, review your sales and marketing material to check that the information is accessible to those with the lowest level of financial sophistication. Make improvements to content, layout and the language used to improve accessibility. Equally important is a review of compliance processes to check for water-tightness and traceability.  

Dealers and brokers might also consider reviewing historic finance proposals to check whether the level of disclosure will meet the fairness test due to form part of the FCA’s assessment of which agreements qualify for compensation. Unfortunately, it is still unclear as to how far back dealers and brokers are expected to review as the FCA seeks to consult on a redress dating back to 2007, despite having only been formed in more recently.

Lastly, I would urge dealers to engage with the FCA once consultation begins. Although it might feel like your voice is small, every interaction our industry has with the regulator will shape their approach for the future and so it is essential that we make the most of every touchpoint available to us.

How Can We Help?  

As with most things, technology is available to make your finance transactions more transparent and easier to handle in a compliant, consumer-centric manner. DealTrak is, of course, one of these platforms. Our built-in compliance module is active on every transaction with your own validation rules in place. Every proposal is fully recorded and auditable so you can cross-reference information for built-in quality assurance. If you have any queries about historic data, speak to us as we can help with that too.  

We're actively reviewing the best way to adapt our platform to meet requirements around commission disclosure and are keen to work with you to jointly address this. I’m keen to identify our next partners to work with this on as we begin to know more about what the market demands. 

If you’re feeling uncertain about the future of finance as a result of the Supreme Court’s decision, getting the right platforms and process in place can be a good starting point. And, if you’re looking for some help in where to start, let’s talk. Contact me directly below and I’ll be happy to assist. 

Email Head of DealTrak