While the Johnson v FirstRand Bank Supreme Court judgment was eagerly awaited by the motor finance industry, its significance extends well beyond this sector.
The decision addresses common features very likely to be widely replicated across the retail sector, and with potentially wider implications for credit brokerage provided by sellers in other fields.
Retailers who facilitate customer credit arrangements should recognise that this transformative ruling could fundamentally alter their business practices.
A summary of the case
This consolidated appeal examined three fundamental questions about commission arrangements between finance providers and intermediaries:
- Fiduciary duty: Did the intermediaries owe customers a fiduciary duty?
- Secret commissions: Were undisclosed commissions effectively 'bribes'?
- Unfair relationships: Did the commission arrangements create unfair customer relationships under the Consumer Credit Act 1974 (CCA)?
Overturning the Court of Appeal's view, the Supreme Court ruled that motor dealers don't owe fiduciary duties to customers. It was held that all parties were pursuing separate commercial objectives and there was no express undertaking by the dealers to put customers' interests above their own. Since civil liability for bribery cannot arise where there is no fiduciary duty, the bribery claims could not succeed.
The Court did find, however, that undisclosed commissions could create unfair customer relationships. This opens the door to widespread challenges across multiple sectors, including retail. The Court identified five critical factors for determining relationship unfairness:
- The size of the commission relative to the cost of credit;
- The type of commission (discretionary vs. fixed rate);
- Customer characteristics and vulnerability;
- The extent and manner of disclosure of the commission; and
- Regulatory compliance.
These factors must be considered holistically. So, while partial disclosure of commission alone won't necessarily create unfairness, it's a significant risk factor.
What this means for retail
Many retailers receive commissions, overrides, or profit-sharing arrangements when facilitating customer credit through store cards, instalment plans, or finance partnerships. The Court's ruling suggests that inadequate disclosure of these arrangements has the potential to render customer relationships unfair, exposing merchants to compensation claims and regulatory action.
If you receive any form of remuneration for credit broking activities, it is important to assess your disclosure practices in the light of the judgment. The critical requirement emerging from this ruling is that customer disclosure must be prominent and clear. Burying commission details in lengthy terms and conditions is insufficient. Customers must understand, before entering agreements, that you receive financial benefits from their credit arrangements and the approximate scale of those benefits.
What retailers can do now
Audit your commission arrangements
Examine how clearly you communicate all commissions to customers, how you quantify and present these payments, whether your commissions are fixed or variable, and how commission amounts compare to actual credit charges.
Consider whether you charge fees for credit-related services or position yourself as providing advice, which could create fiduciary obligations with severe legal consequences for undisclosed arrangements.
Conduct a comprehensive business review
The unfair relationship provisions under Section 140A CCA will drive future litigation across multiple sectors. Review your customer-facing policies and procedures, customer agreements and financial records to identify potential vulnerabilities.
Ensure that all customer-facing teams understand their disclosure obligations. The goal will be to demonstrate proactive compliance and transparent dealing with customers.
Prepare for regulatory impact
The FCA will publish its Motor Finance Compensation Scheme consultation in early October, with just six weeks for responses. Even if you're not FCA-regulated, this consultation will establish important precedents for assessing unfair relationship claims that could influence future challenges across the retail sector.
Address Buy Now, Pay Later exposure
Deferred Payment Credit regulation is approaching through the FCA's CP25/123 consultation, closing 26 September 2025. Review your BNPL partnerships now to understand what commissions you receive, assess whether these arrangements are clearly disclosed, and consider whether commission structures could be challenged as creating unfair relationships.
While merchant-owned BNPL may remain unregulated, increased scrutiny makes proactive disclosure a prudent way to manage risk.
What does the future hold?
Claims management companies are already repositioning to exploit this ruling. The combination of an established unfair relationship precedent, potential 18-year lookback periods, consumer-friendly legal frameworks, and significant financial exposure creates perfect conditions for mass litigation across sectors handling customer credit arrangements. The motor finance sector is already experiencing a surge in claims following the Supreme Court decision, and retail merchants are also likely to experience an increase in claims and complaints.
The Supreme Court's decision signals a fundamental shift toward greater transparency in commission arrangements across all sectors facilitating customer credit. Retail merchants who embrace this change and implement robust disclosure practices will not only reduce legal risk but also build stronger, more trusting relationships with their customers in an increasingly competitive marketplace.
The regulatory momentum suggests that transparency requirements will continue expanding across different credit products and business models. Merchants who establish clear, prominent disclosure practices now will be well-positioned for this evolving landscape, while those who maintain opaque commission arrangements face mounting legal and reputational risks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
