Our expectations of motor finance firms following the Supreme Court's decision in Johnson and others.
On 1 August 2025, in the 3 joined cases of Johnson and others, the Supreme Court largely overturned the earlier Court of Appeal judgment[2] of 25 October 2024.
However, the Supreme Court also clarified that in certain circumstances the failure to properly disclose commission arrangements could be unfair and therefore unlawful.
The Supreme Court agreed with several factors we had identified which could point towards an unfair relationship and fall foul of the Consumer Credit Act (CCA), while recognising it depends on the facts of each case.
Such factors could include:
- The size of the commission relative to the charge for credit.
- The nature of the commission, for example, whether it is discretionary.
- The characteristics of the consumer.
- Compliance with regulatory rules.
- The extent and manner of disclosure.
Firms must comply with the law. We expect firms to familiarise themselves with the Supreme Court judgment (PDF)[3] and ensure they comply with it, seeking legal advice where appropriate.
Firms must also comply with our rules. This includes the commission disclosure rules set out in our Consumer Credit Sourcebook (CONC), and our Consumer Duty. To help firms navigate these, we highlight some things firms should consider below, with examples informed by our engagement with firms and trade bodies.
We also recognise that many firms reviewed their practices following the earlier Court of Appeal judgment and welcome the industry-led changes which aimed to enhance the information provided to consumers. Under the Consumer Duty, we increasingly monitor outcomes consumers are receiving as well as compliance with our rules.
Firms are ultimately responsible for their own compliance with regulatory requirements and the law. We will act where we find that firms are not meeting our expectations.
Commission disclosure requirements in the Consumer Credit Sourcebook (CONC)
Credit broking firms must disclose the existence and nature of any commission, fee or other remuneration payable to them where its existence or amount could actually or potentially affect their impartiality or have a material impact on the customer’s decision to enter into a credit or consumer hire agreement.
Where this disclosure is required by our rules, firms must also disclose how the existence and nature of this commission may affect the amounts payable by the customer.
These disclosures must be prominent and made in good time before the customer enters into the agreement. If a customer requests it, firms must also disclose the amount of commission, fee, or remuneration they earn.
These rules sit alongside firms' wider obligations under the Principles for Businesses, including the Consumer Duty, set out below.
Our expectations under the Consumer Duty, particularly the Consumer Understanding outcome
The Consumer Duty applies on a forward-looking basis. It does not apply to the past action of firms before it came into force. Instead, it applies to the ongoing actions of firms for open products and services from 31 July 2023 and for closed products and services from 31 July 2024.
Our expectations under the Consumer Duty are outcomes-focused, so firms have a degree of flexibility to adopt different approaches to deliver good outcomes for consumers.
Firms must communicate in a way that equips customers to make effective, timely and informed decisions. This means giving customers the information they need (including information about commission arrangements) at the right time, and presenting it in a way they can understand.
Engaging communications
Communications should be designed in a way that encourages consumers to engage with them. Key information should be easy to identify, for example, by using headings or layout.
We’ve seen firms provide customers with a standalone document explaining the commission arrangements, or clearly presenting the commission amount and how it is calculated in a box within a document, and reading this information out to customers. These approaches are likely to support consumer understanding by giving greater prominence to this information. In contrast, some firms have key information in small print, which makes it difficult for customers to spot.
We expect firms to respond flexibly to the needs of customers with characteristics of vulnerability. Firm will usually need to be able to provide support to their customers through different channels. Our Guidance on the fair treatment of vulnerable customers (PDF)[4] provides examples of how different vulnerabilities can make certain channels of support unsuitable. For example, some customers may find it difficult to take in information provided over the phone and have a need for written communications only.
Relevant information
Firms should think carefully about what information is required to support effective decision-making by consumers and should avoid unnecessary disclaimers. Short, concise communications in plain English are more likely to be read and understood, while lengthy and technical passages of text can confuse or overwhelm consumers.
Simple, plain language
Where possible, jargon or technical terms should be avoided.
Where the use of technical terms is unavoidable, firms should explain their meaning in plain language that consumers would likely understand. Where brokers engage with customers directly, they should, where appropriate, tailor communications to meet the information needs of the customer. They should proactively ask the customer if there is anything they do not understand or if they have any questions.
We have seen the commission calculation being disclosed using ambiguous phrases such as ‘a percentage of the loan borrowed or a fixed amount’. This information needs to be presented as clearly and simply as possible. According to our Financial Lives 2024 survey[5], 18.2 million adults (34% of the UK adult population aged 18+) have poor or low levels of numeracy involving financial concepts. Brokers/dealers need to consider this when presenting and explaining information to customers.
Timely communication
Firms should provide customers with appropriate information on the product, sufficiently early in the customer journey so that customers have enough time to consider this in their decision-making.
We have seen examples of firms sharing information about commission arrangements with customers at multiple points in the customer journey (at the quote, proposal, and agreement stage). This can improve the likelihood that consumers understand and act on the information.
Conversely, we have seen examples of firms only providing information about commission arrangements just before a customer signs an agreement. Providing such information so late in the journey does not give customers sufficient opportunity to engage with the information, compare the product with others in the market and make an informed choice. It is also likely to exploit consumers’ behavioural bias to complete the transaction at this late stage.
Brokers and lenders working together to drive good outcomes
Under the Consumer Duty, while firms are generally only responsible for their own actions and omissions, we expect firms along the distribution chain to work together with the shared goal of good customer outcomes.
When firms reflect on their communications, they should consider what consumers receive from both the lender and the broker and work together to ensure that their approach delivers the necessary clarity for customers. For example, information being explained in conflicting or materially different ways by each party could cause confusion.
Where brokers use communications produced by lenders, they should provide relevant feedback to the lender where they find that the communications aren’t clear enough, for example, due to customer queries. The lender can then amend the communications accordingly.
Testing and monitoring customer understanding
It is important that consumers understand key information including, where relevant, commission arrangements, so they are able to act on it. Firms should consider how they can most effectively deliver this outcome, for example by consumer testing. Firms should seek to remedy issues where testing suggests this outcome isn’t being met.
We appreciate it would have been challenging for firms to test whether consumers understood their new disclosures where they acted quickly to comply with the law.
However, we expect firms to test their communications as appropriate, and to monitor the impact they have on consumer behaviour. We expect to see a record of this testing activity and how results were used. Our Consumer Duty guidance (PDF)[6] includes how firms of different capabilities can think about consumer testing.
