Commissions remain commonplace within the financial services industry, with the motor finance sector having been particularly prominent in recent years as concerns the development of common law and regulation around secret commissions. This article takes stock of how the Courts and FCA are currently approaching the issue and what we might expect moving forwards.

Commissions remain commonplace within the financial services industry, with the motor finance sector having been particularly prominent in recent years as concerns the development of common law and regulation around secret commissions. This article takes stock of how the Courts and FCA are currently approaching the issue and what we might expect moving forwards.

Background

Agents, typically brokers in this context, will often qualify as a fiduciary and as such owe certain duties to the principal(s) on whose behalf they are acting. The duty which formed the basic premise of the common law regarding secret commissions was the duty to avoid conflicts of interest. Most simply, an agent should not receive payment from a third party without the informed consent of its principal.

Our earlier article sets out what secret commissions are, the distinction between fully secret and half secret commissions, and the common law as of June 2024.

We now address the developments which have happened since.

Supreme Court Decision in Hopcraft

On 1 August 2025 the Supreme Court handed down its judgment in the matter of Hopcraft v Close Brothers Limited, Johnson v FirstRand Bank Limited, Wrench v FirstRand Bank Limited [2025] UKSC 33.

The SC was dealing with three appeals, all of which concerned the payment of commissions by finance lenders to motor dealers. The Claimants issued claims in the tort of bribery and for dishonest assistance in breach of fiduciary duty, seeking recission of the underlying finance contracts and monetary remedies.

The judgment clarified several important matters:

• The tort of bribery can only be engaged when the recipient of a payment was under a fiduciary duty of loyalty.

Previously, it could be engaged in much broader circumstances including when the recipient was under a duty to provide information, advice, or recommendations on a disinterested basis.

The circumstances in which a fiduciary duty of loyalty will arise was also clarified, and was similarly narrowed:

• There must be “the assumption of responsibility by the fiduciary to act exclusively on behalf of the other in the conduct of the other’s affairs”
• “the relationship of trust and confidence is the consequence, and not the cause, of a fiduciary duty” and “the vulnerability which is the typical characteristic of a person to whom a fiduciary duty is owed, is a consequence and not a cause of a fiduciary relationship”.
• Once the fiduciary duty of loyalty applies, the agent must provide its principal with “all material facts” to enable it to provide informed consent to a commission payment.

Previously, the CoA had concluded that disclosure of the possibility of a payment could be a defence to the tort of bribery. That will no longer be sufficient to exclude liability, as the SC clarifies “partial disclosure has never been enough”.

• Car dealers do not owe a fiduciary duty of loyalty to their customers when providing a credit brokering service for car finance.

In reaching this conclusion the SC looked at the applicable regulatory framework. The FCA rules did not subject car dealers to the no profit and no conflict rules, nor did the rules require them to make the full disclosures a fiduciary would be obligated to make.

The SC found that it was evident the parties were only considering their own interests, and that none of the car dealers had given any express assurances or undertakings about putting aside their own commercial interest. Fundamentally, “there was no agency undertaken by the dealer for the customer in the negotiation of the finance package with the lender”, and the SC concluded that “the typical features of the transactions are incompatible with the recognition of any obligation of undivided or selfless loyalty by the dealer to the customer when sourcing and recommending a suitable credit package”.

This therefore meant that the lenders could not be liable in the tort of bribery, or for dishonest assistance, as the car dealers did not owe the customers a fiduciary duty of loyalty (which was a fundamental requirement for each claim).

FCA

Following the SC judgment in Hopcraft the FCA said it would consult on a compensation scheme for motor finance customers.

On 7 October 2025 the FCA began consulting on an industry-wide compensation scheme which addresses liabilities for motor finance customers treated unfairly between 2007 and 2024. It had extensive engagement with consumer groups, lenders, investors, motor manufacturers, trade bodies and professional representatives. It expects to publish final rules in February/March 2026.

On 3 December 2025 the FCA also confirmed it will lift the existing pause on its handling of motor finance complaints on 31 May 2026. By then the compensation scheme, if it proceeds, would have been finalised and implemented.

Commentary

The SC judgment in Hopcraft offers a lot of clarity on an area of law which has been somewhat turbulent in recent years. It will be a huge relief for motor finance lenders, as it substantially reduces the scope of circumstances in which bribery and secret commission claims can be established against them. But as with all litigation, where there are winners there are losers, and the judgment is a big stumbling block for claims management firms who have encouraged customers to sign up with them and claim compensation for mis-sold car finance involving secret commissions.

The FCA’s introduction of a compensation scheme should go some way to addressing the substantial number of secret commissions within the motor finance industry.