After years of uncertainty, the issue of discretionary commission arrangements is once again at the forefront, this time with the backing of the UK Supreme Court and the Financial Conduct Authority.
Last week’s ruling from the Supreme Court opens the door to thousands of similar legal claims across the industry. The core issue revolves around historic motor finance agreements, where brokers could increase a customer’s interest rate in exchange for a higher commission.
Crucially, the ruling allowed the motor finance industry, from major banks like Lloyds and Santander UK to specialist lenders and captive finance arms, such as those of Ford and BMW, to avoid what could have been a collective £44 billion compensation bill. Instead, the Financial Conduct Authority has stepped in, announcing plans for a significantly smaller redress scheme, expected to cost between £9 billion and £18 billion. The scheme will go out for consultation by October and is likely to offer an average redress of around £950 per claim.
The FCA’s scheme will help draw a line under the car finance scandal, compensating millions of drivers who were overcharged as a result of controversial commission arrangements between lenders and car dealers dating back to 2007.
Combined, these developments create significant headwinds for lenders. Some have already delayed financial results as they try to gauge the scale of their exposure. The final shape of the FCA redress scheme, alongside a clear legal precedent, will have an undoubted impact on some lenders.
When lenders come under pressure, the effects are rarely contained; credit criteria tighten, and approval times can stretch out. Lenders may pull products or temporarily leave the market altogether. For dealers who rely heavily on a small panel, or worse, a single captive lender, this creates commercial risks.
In this environment, resilience is everything, and dealers can’t afford to be passive. It’s not just about having access to finance today, but being able to secure funding for every customer tomorrow, even if the market shifts. That’s why it’s so important to work with a finance partner that offers genuine panel breadth and independence.
Access to more lenders gives dealers greater flexibility and choice. If one lender pulls back, there are still options available. That means customers are more likely to get approved and more likely to get a competitive rate. It also means deals are less likely to fall through, and dealer margins are better protected.
There’s also a reputational dimension at play. The FCA remains under pressure to restore consumer trust, and this spotlight will intensify over the coming months. Both lenders and dealers will play a role in championing new levels of transparency with consumers.
Now more than ever, customers want clarity. They want to know they’re getting a fair rate and to deal with people who act in their best interest. Dealers who work with finance partners that prioritise transparency, fair outcomes, and ethical practices will be better placed to maintain that trust and grow their business on solid ground.
Of course, not all brokers are created equal. Some still lack the agility to navigate changing lender appetites. But those who are genuinely independent, with access to a diverse range of funders, are proving to be vital partners in today’s market. They can match customers to the right product quickly, adapt to sudden changes, and deliver the consistency that dealers need during uncertain times.
Regulatory scrutiny, legal action, and wider economic pressures all combine to create significant disruption for the industry. However, amid that disruption lies opportunity for those who are prepared.
Dealers who act now to strengthen their finance partnerships, broaden their access to lenders, and put the customer’s experience at the heart of their offer will be in a stronger position to weather the storm. They’ll keep deals moving, keep customers satisfied, and keep their businesses moving forward.
The risks are real. But so are the tools to manage them. Resilience is built on choice, agility, and trust, and in today’s market, those qualities matter more than ever.
Alastair Grier is CEO of CarMoney