In a controversial ruling, the UK Supreme Court has overturned a previous appeals court decision, declaring that car finance lenders are not liable for undisclosed commission payments made to car dealerships—leaving many consumers shocked and disappointed.
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What Happened?
The case centered around Marcus Johnson, a 35-year-old factory supervisor from Cwmbran, Wales, who entered into a car finance agreement with Firstrand in 2017 to purchase a Suzuki. Johnson unknowingly paid £1,650.95 in commission, which was not clearly disclosed in the contract. He later discovered that the dealership had acted not as an independent credit broker but as an agent with a financial incentive from the lender.
In October 2024, the Court of Appeal ruled in favor of Johnson and two other drivers, stating they were entitled to compensation for hidden commissions. The judgment emphasized that customers were not properly informed about the commissions dealers would receive for arranging the finance deals.
But on Friday, the Supreme Court reversed that decision, ruling that lenders are not automatically responsible for undisclosed commissions. Despite this, the court allowed Johnson to retain his compensation, stating he had been in an “unfair relationship” with the lender.
Johnson Reacts: “It Doesn’t Sit Right”
Marcus Johnson expressed both relief and disappointment following the decision.
“It was surprising and sorrowful… I felt confident based on what happened to me and how unfair it was,” he said. “This ruling sends the wrong message to consumers—especially those who were secretly overcharged.”
He acknowledged that commissions are a common industry practice, but criticized the lack of transparency and vague contract language.
“A single obscure line in the small print isn’t enough. It feels like customers can be secretly overcharged and that’s now acceptable.”
Though Johnson’s individual compensation remains intact, he voiced concern for other drivers in similar situations who may now be unable to seek redress.
Supreme Court’s Rationale
The ruling, issued by Lords Reed, Hodge, Lloyd-Jones, Briggs, and Hamblen, clarified that car dealerships do not owe a fiduciary duty to their customers unless expressly agreed upon. They stated that the aim of a car dealer is primarily to maximize profit, not necessarily to find the best financial deal for the customer.
“No reasonable customer would expect a car dealer to sacrifice business interests by revealing commission arrangements,” the court noted.
This legal reasoning effectively shields lenders from direct liability in most cases involving undisclosed commissions—unless specific unfairness or deception can be proven.
What Happens Next?
While Marcus Johnson’s compensation is upheld, the ruling sets a precedent that could impact thousands of similar cases. Consumers entering into finance agreements through brokers or dealerships may now face greater challenges in claiming compensation for undisclosed fees or commissions.
Johnson, while grateful for his win, urged others to scrutinize future agreements carefully:
“I’ll be checking every word next time. But it’s frustrating that so many others in the same boat won’t get the same outcome.”