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August 4, 2025
The ICS experts dug into the Supreme Court Judgement over the weekend to outline the key takeaways for firms.
Late on Friday the Supreme Court passed judgement on three cases related to commission payments in motor finance.
The court handed a partial win to motor finance companies and for two of the cases it ruled that lenders are not liable for hidden commissions payments in motor finance schemes.
However, in the case of Mr Johnson, the Supreme Court found that the relationship between Mr Johnson and the finance company was unfair - as a result of the size of commission the dealer received and poor disclosure of that commission, which was ruled as unfair and therefore unlawful.
It’s this decision which has set a precedent for the industry and means some car buyers may now be entitled to compensation. So, despite the sigh of relief from the wider finance industry, the judgement still has significant implications for firms.
Consultation
This is supported by the FCA’s announcement on 3rd August, that it will launch a consultation into a redress scheme by early October, with the first compensation payments expected in 2026.
The FCA originally intended to set out its next steps within 6 weeks of the judgement but has moved quickly, and perhaps under pressure, to ensure clarity and certainty to consumers, firms and investors as quickly as possible and in its words, to help ensure that the “integrity of the motor finance market so it works well for consumers now and in the future”.
In its announcement the FCA has also reinforced that it intends to put in place a redress scheme that is easy for consumers to claim, without the need to use claims management companies.
The FCA states that “Many motor finance firms were not complying with rules or the law by not providing customers with relevant information about commission paid by lenders to the car dealers who sold the loans”.
In its announcement, the FCA stated that most individuals, eligible to receive compensation will probably receive less than £950 per agreement. Further details of the announcement can be found here.
Intermediaries
So, what does this mean for intermediaries and the insurance industry?
Firstly, this is not the end of the story:
- Barclays Judgement following their Appeal case on a FOS decision is due in September, having been delayed until after Friday’s judgement;
- The FCA’s final insurance premium finance report is due by the end of the year, which will propose changes to address any issues identified.
The FCA’s interim report acknowledged the importance of insurance premium finance, as well as the risks associated with bad debt, but it still found examples of what it found to be potentially high APRs over 30%, with costs for paying monthly differing substantially between motor and home insurance, as well as between distribution channels. The FCA found that premium finance revenue materially exceeds costs for some providers.
The FCA intends to explore its concerns further in the next phase of the study, focusing on:
- firms’ price setting for higher-priced products more closely, assessing the value these products provide and the extent to which the prices are paid by vulnerable customers;
- the differing approaches in motor and home insurance to understand whether there are any issues with fair value and the way competition works;
- the effect of specific features of the market such as commission and clawback arrangements;
- and the extent to which consumers can effectively compare premium finance with other credit products.
It is safe to say that the spotlight remains on commission practices, fair value, costs versus revenue and commission disclosure. Firms should be mindful that where insurance premium finance practices have been deemed to be unfair, then customer redress may be required.
As we have outlined before, under existing Consumer Duty and Product Governance requirements, intermediaries offering insurance premium finance should ensure you:
- Understand and have documented the costs for providing premium finance, including how much of their premium finance debt your writing off;
- Consider the remuneration received, in light of the above and you can justify the product provides fair value to customers – the FCA does not want premium finance to be used to prop up low insurance commissions;
- Consider whether any other charges are reasonable and do not dilute the fair value;
- Provide communications that are clear, fair and not misleading, so customers understand the costs for paying by premium finance and your relationship with premium finance providers;
- Ensure that vulnerable customers are identified and do not receive poorer outcomes;
- Make changes where your review highlights concerns.
However, if you do have concerns, please contact us first to discuss further. We can provide support, as this is an area we are assisting our firms with. Get in touch to find out more via email at , or call us at 01892 539 600.
