The Supreme Court commission case: a defining moment for financial services

The financial services industry is bracing for a pivotal Supreme Court hearing that could reshape the landscape of commission practices and consumer protection. The outcome of this case is likely to have far-reaching implications for firms, regulators, and consumers, potentially triggering a wave of remediation claims and driving changes to existing commission structures.

Let’s break down what’s at stake and what firms should be doing to prepare.

What is the case about?

At the core of the dispute is the issue of commission disclosure: to what extent must firms inform customers about commissions paid to intermediaries?

The case stems from a judgment handed down on 25 October 2024 by the Court of Appeal in three linked appeals – Hopcraft v Close Brothers Ltd, Johnson V FirstRand Bank Ltd and Wrench V FirstRand Bank Ltd. The Court of Appeal found that the intermediaries in those cases, being the car dealers who referred the customers to lenders for car finance, owed those customers both a fiduciary duty and a disinterested duty. This meant that the car dealers should have obtained the customers’ fully informed consent about the commission payments; by fully disclosing the commission they were due to receive from the lenders and how it was calculated. The Court of Appeal also found that if the commission payment was secret, i.e. not disclosed to the customer, then the lenders would have primary liability.

The FCA has already made its stance clear — fair treatment of customers is non-negotiable. Under rules like Principle 6 (Treating Customers Fairly) and the Consumer Duty, firms are expected to act in customers’ best interests, and transparency around commission payments is a key part of that expectation.

Why does this matter?

A Supreme Court ruling in favour of stricter commission disclosure could:

• Widen the scope for customer redress: Firms may face retrospective claims from customers who argue they were misled about commission arrangements that affected the pricing or suitability of financial products. The FCA is already considering an industry-wide redress scheme to simplify payments and protect consumers.
• Force structural changes to commission models: Firms might need to revisit and overhaul their commission structures, moving towards more transparent and customer-aligned models to avoid future liability.
• Trigger FCA investigations and reviews: The FCA may ramp up its supervisory activity, potentially conducting thematic reviews or launching enforcement action against firms with opaque commission practices.

For sectors like motor finance, mortgage lending, and consumer credit, where commission-based models are common, this case could be a watershed moment.

What should firms be doing now?

With the hearing looming, firms should take proactive steps to get ahead of the potential fallout:

1. Audit existing commission structures: Review commission arrangements to assess whether they could be perceived as creating a conflict of interest and whether disclosures meet current regulatory expectations.
2. Strengthen disclosure practices: Even before the ruling, firms can enhance their transparency practices, making it crystal clear to customers how commissions impact the cost and terms of products.
3. Prepare for potential redress exercises: Firms should scenario-plan for possible remediation requirements, including identifying affected customers, calculating potential redress, and setting aside reserves if necessary.
4. Engage with legal and regulatory experts: Staying close to the evolving legal landscape is critical. Firms should work with legal counsel and regulatory specialists to understand the nuances of the case and map out their response strategies.

The bigger picture: A shift towards consumer-centric regulation

This case is not happening in a vacuum. It reflects a broader regulatory shift towards heightened consumer protection — a shift exemplified by the Consumer Duty, which raises the bar for firms to deliver positive outcomes for customers.

The impending ruling is a reminder that firms can no longer view transparency and fair treatment as box-ticking exercises. They must be woven into the fabric of their business models, culture, and customer interactions.

Looking ahead: stay informed, stay prepared

We’ll be closely monitoring the Supreme Court proceedings and providing ongoing insights into what the judgment means for the industry. We will be helping firms navigate the implications of the Supreme Court’s decision once rendered.

In the meantime, firms should use this as an opportunity to stress-test their commission practices, enhance their governance frameworks, and demonstrate their commitment to doing right by their customers.

Because whether or not the Supreme Court imposes new legal obligations, the direction of travel is clear: the future of financial services is one where consumer interests come first.

For more information, please contact Ciaran McAlinney, Partner and Head of Finance and Russell Jones,Senior Associate.

Date published: 19 March 2025