Commission Disclosures: What is the impact of Johnson v FirstRand?
In 2024, a Court of Appeal judgement sent the finance sector into something of a spin, with a decision over commission disclosure in motor finance deals potentially causing seismic changes to how any finance broker will be required to structure and communicate commission arrangements going forward
The wider finance sector has moved to full disclosure of commission, in anticipation of future decisions. As a business that has always communicated fees to clients, we welcome greater transparency in the industry and are not facing any problems as a result of industry changes.
Latest updates
01/08/2025 – On 1st August, 2025, the UK Supreme Court overturned the landmark ruling on car finance commissions, stating that car dealers who sold vehicles and arranged the finance do not owe fiduciary duties to customers and lenders are therefore not liable for the commission. This has eased fears among banks about a redress scheme that analysts warned could run into the tens of billions of pounds. Lenders may still face claims for overcharging in some cases under a compensation scheme, but the costs are expected to be much lower than feared. Read more here.
07/04/2025 – Following three days of hearings at the Supreme Court, which examined appeals lodged by Close Brothers, owner of Close Brothers Motor Finance, and FirstRand Bank, owner of Motonovo Finance, against Court of Appeal ruling, the UK’s motor finance industry has been told not to expect a judgement until July 2025.
22/11/2024 – The FCA has proposed longer deadlines for motor finance complaints handling and is currently consulting on extending the timeframe for firms to handle complaints involving non-discretionary motor finance commission arrangements. Two options have currently been proposed. The extension of deadlines to 31st May 2025, to coincide with a likely Supreme Court appeal decision, or until 4th December 2025, to align with existing discretionary commission complaint rules.
What happened?
On 25th October 2024, the Court of Appeal issued a judgement regarding motor finance commissions, related to three cases – Johnson v FirstRand Bank Limited, Wrench v FirstRand Bank Limited and Hopcraft v Close Brothers. The cases addressed issues related to commission structures and their implications for consumer protection.
The court examined whether commission practices by finance providers were transparent and compliant with regulatory standards. To varying degrees, the cases found that there has been a lack of transparency from the finance providers and therefore the court found against them.
The ruling emphasised that motor dealers must clearly disclose commission arrangements to consumers, ensuring that any commissions do not unfairly influence the terms of finance agreements.
The judgement has ultimately reinforced existing regulations aimed at protecting consumers in motor finance transactions and highlighted the need for financial institutions to operate transparently to avoid misleading practices.
The considerable panic in the industry was caused for a number of reasons. The outcome itself was unexpected. However, more unexpected was the wording of the judgement, which did not specify application of the judgement solely to regulated agreements such as motor finance, potentially extending the reach of the judgement to unregulated agreements, including those provided by commercial finance brokers
What does this mean?
There are a number of key impacts on commercial finance brokers:
- Transparency – Commission structures will need to be clearly communicated by clients so they can provide informed consent. This will include disclosing how commissions may influence options presented
- Compliance – Brokers will need to review and possibly restructure commission arrangements to ensure they are compliant and do not risk misleading customers
- Potential liabilities – Brokers may face greater scrutiny and potential liability if they fail to disclose commission arrangements adequately
- Customer protection – The judgement highlights consumer protection, so brokers will need to ensure deals brokered focus on suitability of products rather than potential commission earnings
- Best practice in the market – The decision could prompt wider industry changes that drive greater transparency, and how brokers operate in the future
The most significant challenge presented by the ruling is the ambiguity of its application across different contexts. While leading bodies including the NACFB, FLA and UK Finance work together to steer the industry through the impacts if the ruling, some brokers and funders are choosing to hold out on the payment of any deals, for fear of exposing themselves to liabilities – a delay that many businesses awaiting finance can ill afford.
What is Bathgate’s response?
Gordon Andrews, MD at Bathgate Business Finance, said: “We welcome the Court of Appeal’s decision as it will improve transparency, drive best practice and more ethical approaches in the sector, ultimately ensuring that consumers are receiving the best advice and deals, which deliver better outcomes. Better outcomes will help to improve consumer trust.
“Bathgate is already well positioned to respond to these changes and as a point of best practice we already disclose in writing to customers where we operate a commission system and invite them to contact us for further details if required. We also pride ourselves on brokering the best possible finance solution for our customers’ specific needs, we document our decision-making on each deal and we are confident in our compliance and transparency.
“Importantly, unlike the majority of brokers in the UK who do not have this facility, we write a third of our business utilising our own Bathgate Business Finance Fund, ensuring that our clients have even greater choice in the business finance marketplace.
“We know that there will be more changes to come, and we are monitoring the situation closely. We are also following initial guidance provided by NACFB, FLA and UK Finance and like them remain hopeful that a more nuanced interpretation that recognises the distinct product specialisms across the commercial finance spectrum will emerge.”