Supreme Court Car Finance Ruling Explained — Johnson v FirstRand Bank
Scheme status (updated 5 August 2026): parts of the FCA motor finance redress scheme are temporarily suspended while the Upper Tribunal considers legal challenges. Lenders do not currently have to calculate or pay compensation under the scheme, the original decision and payment dates no longer apply, and no payment under the scheme is guaranteed. If the scheme proceeds, first payments are expected in 2027 at the earliest. Any dates mentioned below were set before the suspension.
In August 2025 the UK Supreme Court issued its judgment in Johnson v FirstRand Bank Ltd (t/a MotoNovo Finance) — the most significant consumer credit ruling in a generation. The judgment confirmed that undisclosed discretionary commission arrangements in car finance agreements were unlawful, provided the legal foundation for the FCA’s PS26/3 redress scheme, and established the compensation methodology now being applied to 12.1 million agreements.
In this guide
- Background — What Was the Case About?
- The Journey Through the Courts
- What the Judges Decided — Key Legal Points
- How the Ruling Shaped the FCA’s PS26/3 Scheme
- What the Ruling Means for Your Claim
- Frequently Asked Questions
- Related Guides
- Our Partner's Fees Explained
- Think You May Have a Motor Finance Claim?
Background — What Was the Case About?
Marcus Johnson purchased a second-hand Suzuki Swift from a car dealer in 2017 using hire purchase finance arranged through MotoNovo Finance, a trading name of FirstRand Bank Ltd. The dealer received a commission from MotoNovo that was not disclosed to Mr Johnson. Crucially, the dealer had discretion to set Mr Johnson’s interest rate within a range — and the higher the rate, the more commission the dealer earned.
Mr Johnson brought a claim arguing that this arrangement created an unfair relationship under Section 140A of the Consumer Credit Act 1974 and that the broker had breached its duty of loyalty by putting its own financial interests ahead of his without disclosure.
The Journey Through the Courts
County Court — Mr Johnson wins
The original county court found in Mr Johnson’s favour — the undisclosed commission created an unfair relationship and the dealer had breached its fiduciary duty.
Court of Appeal — October 2024
The Court of Appeal upheld and strengthened the judgment, finding that the dealer had breached its common law duty not to act with undisclosed conflicts of interest. Linked judgments in Hopcraft v Close Brothers and Wrench v FirstRand Bank confirmed the same principles applied across multiple lenders.
Supreme Court — August 2025
The Supreme Court dismissed the lenders’ appeals and affirmed the Court of Appeal’s findings. The unanimous judgment confirmed:
- Car dealers acting as credit brokers owe a duty of loyalty to the customer — they must not allow their own financial interests to conflict with the customer’s without full disclosure and informed consent
- Discretionary commission arrangements created an inherent and undisclosed conflict of interest
- This conflict was unlawful under Section 140A of the Consumer Credit Act 1974 as it created an unfair relationship
- The unlawful practice applied to agreements from 6 April 2007 onwards
- The appropriate remedy was disgorgement of the commission plus interest from the date of the agreement
What the Judges Decided — Key Legal Points
The duty of loyalty
The Supreme Court confirmed that a credit broker — including a car dealer arranging finance — owes a duty of loyalty to the borrower. A DCA gave the dealer a financial incentive to increase the borrower’s interest rate — directly contrary to the borrower’s interest — without the borrower knowing.
Informed consent as the test
The legal test was whether the customer gave informed consent to the commission arrangement. Burying a reference to commission in small print, or mentioning commission in general terms without specifying the amount or the conflict of interest it created, did not constitute informed consent. In practice virtually no DCA agreement met this test.
The remedy — disgorgement
For cases closely matching Johnson v FirstRand, the appropriate remedy is disgorgement — repayment of the entire commission plus interest, rather than a damages calculation based on estimated harm. This is the legal basis for the Johnson Remedy within PS26/3. For other cases, the Hybrid Remedy applies. See: The Johnson Remedy Explained
How the Ruling Shaped the FCA’s PS26/3 Scheme
The Supreme Court ruling provided the legal foundation the FCA needed to confirm its redress scheme. Once the judgment confirmed the unlawful practice and the appropriate remedy, the FCA was able to confirm 12.1 million eligible agreements, £7.5 billion in estimated total redress, the Hybrid Remedy as the standardised methodology, the Johnson Remedy for the most serious cases, and the complaint deadlines of 30 June and 31 August 2026. The FCA confirmed PS26/3 on 30 March 2026.
See: FCA Car Finance Redress Scheme Explained
What the Ruling Means for Your Claim
The Supreme Court ruling means that if your car finance agreement included a DCA, you have a legally confirmed right to compensation. The legal question of whether the practice was unlawful has been definitively answered — you simply need to submit a complaint through the PS26/3 scheme to receive your redress.
Frequently Asked Questions
Do I need to reference the Supreme Court ruling in my complaint?
No. Your lender is aware of the ruling and PS26/3. Simply state you are requesting redress under the FCA’s PS26/3 motor finance redress scheme.
What if my lender argues the ruling does not apply to my agreement?
If a lender rejects your complaint in a way that appears inconsistent with the Supreme Court ruling and PS26/3, escalate to the Financial Ombudsman Service. The FOS is well briefed on the ruling and will apply it correctly.
Is the Supreme Court ruling final?
Yes. The Supreme Court is the final court of appeal in the UK. There is no further domestic appeal route.
What about the Hopcraft v Close Brothers case?
Hopcraft v Close Brothers was one of the linked cases decided alongside Johnson v FirstRand. The same principles apply — Close Brothers agreements within the eligible period are subject to PS26/3 on exactly the same basis. See: Close Brothers Car Finance Claims
Related Guides
FCA Car Finance Redress Scheme Explained
What Is a Discretionary Commission Arrangement (DCA)?
Close Brothers Car Finance Claims
Back to Car Finance Claims Hub
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Think You May Have a Motor Finance Claim?
The FCA estimates average compensation of around £830 per eligible agreement, but eligibility and payment amounts vary. Some customers may receive nothing. Complaints about agreements started from 1 April 2014 should be submitted by 30 June 2026 to be considered under the earlier timetable. Different dates apply to older agreements. The scheme is currently subject to legal challenge, so dates and payment timings may change.
