Following a much-anticipated judgment handed down by the Supreme Court of England and Wales on Friday, 1 August 2025, motor car finance lenders in the UK market likely breathed a sigh of relief.
The English Supreme Court found that:
- discretionary commissions paid by lenders to car dealers did not constitute bribes; and
- the car dealers did not to owe fiduciary duties to their customers and, as such, the lenders could not be liable, as accessories, for breach of fiduciary duties.
The English Supreme Court decision has now restored the more orthodox judicial approach to common law bribery and fiduciary duties. This has been welcomed by legal commentators in the UK, but may be seen as a blow for consumer rights groups.
On the specific facts of one case, however, the English Supreme Court identified the existence of “an unfair relationship”, within the meaning of the provisions of section 140A of the (English) Consumer Credit Act 1974, between one lender and its customer. That customer was entitled to succeed in his appeal. The court recognised that a broad range of factors are normally relevant to any assessment of the test for unfairness, including: the size of the commission relevant to the charge for credit; the nature of the commission (because, for example, a discretionary commission may create incentives to charge a higher interest rate); the characteristics of the consumer; the extent and manner of the disclosure […]; and compliance with the regulatory rules.
UK commentators are reporting that the English Supreme Court decision means that motor finance consumers in the UK, who believe they should not have paid as much or any commission, will be confined to statutory claims and / or any redress scheme which may ultimately be put in place by the Financial Conduct Authority (“FCA”). The FCA confirmed on 3 August 2025 that it will consult on an industry-wide scheme to compensate motor finance customers who were treated unfairly. It intends to publish the consultation by early October 2025 and to finalise any scheme in time for consumers to start receiving compensation in 2026. The FCA estimates the cost of any scheme (including administrative costs) would not be materially lower than £9 billion – and it could be materially higher, with estimates of a total cost as high as £18 billion.
While the decision relates to the laws and regulatory regime applicable in the UK, the litigation has attracted substantial attention in this jurisdiction also. It is relevant from an Irish law perspective, given the commonality of jurisprudence in relation to fiduciary duties and common law bribery, and the persuasive authority of English law judgments in some areas of Irish law. The return to a traditional approach to common law bribery and fiduciary duties will likely be welcomed here also.
From a financial services regulatory perspective, however, Irish law differs from the applicable regime in the UK in a number of key respects. For this reason, the FCA consultation and any redress scheme may not be of direct relevance to regulated firms and / consumers in the Irish market, but will still be of interest from the broader perspective of consumer protection. Firms will be aware that on 12 June 2024, the Central Bank issued a Dear CEO letter setting out its expectations in relation to discretionary commission arrangements and that the revised Consumer Protection Code (due to take effect in March 2026), makes specific provisions for those types of arrangements. Regulated firms will of course be paying careful attention to these requirements.
Matheson will continue to analyse the impact of this decision for our financial services clients.