Court of Appeal Decision on Motor Commission Claims: Credit Brokers and Lenders Duties

In three recent Court cases*, the Court of Appeal clarified obligations on commission transparency in motor finance involving ‘secret’ and ‘half-secret’ commission, where borrowers are only informed that there ‘may be’ a commission.

Claimants argued they weren’t properly informed about commissions paid between finance providers and dealers. The Claimants were entitled to rescission of the finance agreements/equitable damages, and the Court ordered the lender to repay the commission with interest to the Claimants.

Key Findings

1. Duties: Brokers owe a disinterested duty – duty to provide information on an impartial basis to the customer in relation to the credit available, and fiduciary duty – duty to act with loyalty and avoid conflicts of interest to customers.
2. Disclosure: References in the lender’s standard terms to the fact a commission may be payable to a broker is insufficient to negate secrecy. The less sophisticated the consumer, the more rigorous the efforts required to draw their attention to the disclosure.
3. Informed Consent: Fully informed consent must be given by the borrower. Merely telling the borrower that the broker may receive commission is not sufficient for the borrower to provide fully informed consent.
4. Accessory Liability of the Lenders: Credit broker and lenders have primary liability if the commission is kept entirely secret from the customer, and the lender will be an accessory to the breach in partial disclosure cases by paying commission if it knew fully informed consent had not been obtained. They will be deemed to have acted dishonestly by either knowing about lack of consent or deliberately turning a blind eye to the broker’s breach.

Implications for Motor Commission Claims

This decision strengthens the case for transparency in motor finance, likely leading to stricter disclosure practices across the industry. Lenders and brokers may face increased liability and scrutiny, with consumers now more empowered to challenge finance agreements. The Financial Conduct Authority are also considering what impact the Court of Appeal’s judgment has on the review into historical discretionary commission arrangements in motor finance, with the deadline for their review further extended until 4th December 2025.

How We Can Help

As a law firm with expertise in dispute resolution, we help clients affected by non-disclosed commissions. MSB assess your finance agreement to see if you have been impacted by these commission arrangements, and then assist you in making a complaint. If you believe undisclosed commissions have impacted your finance agreement, contact us today for expert legal support.

*Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd, and Hopcraft v Close Brothers Ltd ([2024] EWCA Civ 1282)’