The UK’s Supreme Court is currently deliberating on a pivotal case concerning Personal Contract Purchase (PCP) car finance agreements, a decision that could significantly impact consumers and the motor finance industry alike. This case centres on the transparency of commission payments made to car dealers by lenders and whether consumers were adequately informed about these commissions when entering into finance agreements.  

Understanding PCP and the Issue at Hand

Personal Contract Purchase (PCP) is a popular method of financing vehicle purchases in the UK. It allows consumers to pay an initial deposit followed by monthly instalments, with the option to make a final balloon payment to own the car outright at the end of the agreement. Alternatively, they can return the vehicle or trade it in for a new one. A critical aspect of some PCP agreements has been the payment of commissions by lenders to car dealers for arranging the finance. The crux of the current legal debate is whether these commissions were transparently disclosed to consumers and if the dealers had a fiduciary duty to act in the best interests of their customers. 

The Genesis of the Legal Challenge

The controversy began with three cases—Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd, and Hopcraft v Close Brothers Ltd—where consumers alleged they were unaware of commissions paid to dealers facilitating their car finance agreements. In October 2024, the Court of Appeal ruled in favour of the consumers, stating that car dealers owed a fiduciary duty to their clients and that undisclosed commissions constituted a breach of this duty. This landmark decision opened the floodgates for potential compensation claims, drawing parallels to the Payment Protection Insurance (PPI) scandal.

The Supreme Court Hearing

In response to the Court of Appeal’s decision, lenders Close Brothers and FirstRand Bank (MotoNovo) appealed to the Supreme Court. The hearing, which commenced on 1 April 2025, saw interventions from the Financial Conduct Authority (FCA) and the National Franchised Dealers Association. The FCA expressed concerns that the Court of Appeal’s ruling might have overextended in attributing fiduciary duties to car dealers, suggesting that such a broad application could have unintended consequences for the financial market.   

Potential Implications for Consumers

Should the Supreme Court uphold the Court of Appeal’s decision, the ramifications could be extensive: 

• Compensation Claims: Consumers who entered into PCP agreements without clear disclosure of commissions might be eligible for compensation. Estimates suggest that the total compensation could rival the compensation paid out during the PPI scandal.
• Industry Reforms: A ruling in favour of consumers could prompt significant changes in how car finance agreements are structured and sold, emphasising greater transparency and fairness.
• Regulatory Actions: The FCA may implement industry-wide redress schemes, mandating lenders to proactively address past mis-selling and ensure compliance with enhanced disclosure requirements. 

What you can do:

If you’ve ever taken out a PCP agreement — especially before January 2021 — and weren’t clearly told about any commission payments, you could be entitled to compensation depending on how the Supreme Court rules.

Start your application with Claims.com today by reaching out to us via our contact form here and we’ll make sure that you can file your claim with as little effort as possible!