What does it mean for retailers who use third party lenders?
Last week, the UK Supreme Court largely overturned a previous Court of Appeal decision that had deemed hidden commission payments from third-party lenders to car dealers unlawful—thereby avoiding the prospect of massive redress liabilities across the industry.
The Court rejected claims based on bribery or breach of fiduciary duty, clarifying that car dealers acting as credit brokers do not owe a fiduciary “duty of loyalty” to their customers in this context. As such, they are not liable for non-disclosure on those grounds.
However, one claimant did succeed under Section 140A of the Consumer Credit Act 1974, as the court found that his finance arrangement constituted an “unfair relationship.” In that case, the commission was unusually high (up to 55% of the credit charge), poorly disclosed, and there was an undisclosed commercial link between the broker and the lender.
Following the ruling, the Financial Conduct Authority announced it will publish a consultation paper by October 2025 proposing an industry-wide redress scheme, which could be in operation by 2026. The scheme will focus on discretionary commission arrangements and poorly disclosed high commissions.
The Supreme Court’s decision significantly narrows the scope for blanket claims against lenders for hidden commissions, but opens the door to targeted redress where credit arrangements are unfair. For retailers in sectors like furniture who rely on credit brokers, the ruling reinforces the importance of transparency, fairness, and compliance—especially as regulators may extend scrutiny and redress mechanisms beyond motor finance.
Retailers would be wise to audit existing and historical credit broker agreements, clarify commission structures and eliminate discretionary elements that may be harmful or opaque to consumers.
An upcoming guest article from a BRC associate member will explore the ruling in more detail, including what it means for retailers using third-party credit brokers, including the potential for increased scrutiny around unfair arrangements, the likelihood of regulatory expansion into other sectors, and best practices around disclosure and transparency of finance agreements.
