As the UK awaits the Supreme Court ruling on the motor finance commission case this July, the financial services industry finds itself on the brink of another seismic shift—one that could reverberate far beyond car showrooms.
At its heart, this case isn’t just about discretionary commissions or mis-sold car loans. It challenges the legitimacy of opaque, commission-based practices that underpin large swathes of the UK financial ecosystem—from mortgage and insurance brokers to energy switching services and investment platforms.
The Court of Appeal’s landmark ruling in October 2023 found that car dealers arranging hire-purchase agreements owed fiduciary duties to their customers. That means acting in the customer’s best interest—not their own. This included a legal obligation to disclose commissions, both the fact of them and their amount. Failure to do so, the court ruled, rendered those commissions unlawful.
This changes everything.
Fiduciary Duties: No Longer Just for Advisers?
If the Supreme Court upholds this ruling, brokers of all stripes—regulated or not—could find themselves subject to fiduciary standards traditionally reserved for professional financial advisers.
The implications are profound:
- Mortgage brokers may be required to fully disclose all commissions—whether fixed or variable—and prove informed customer consent.
- Retailers offering consumer credit could be found liable for failing to disclose embedded commissions on buy-now-pay-later or hire-purchase agreements.
- Energy or telecoms brokers, many of whom operate under similar introducer arrangements, may also be brought under scrutiny.
This cuts to the core of how intermediary-led distribution works in the UK—a model long protected by regulatory carve-outs and vague disclosure requirements.
A PPI Flashback—With a Digital Twist
The Financial Conduct Authority (FCA) has signalled it may propose an industry-wide redress scheme—akin to the PPI programme—if the court upholds the fiduciary breach. But unlike PPI, this time claims management companies (CMCs) are moving faster, locking in clients with heavy cancellation clauses and threatening to flood the county courts with litigation.
That alone is a public interest concern. With as many as 40 million finance agreements potentially affected, the risk of clogging the justice system and delivering inconsistent outcomes is real and urgent.
There is an opportunity, however, to break from past mistakes.
Lenders and brokers could pre-empt chaos by developing voluntary redress schemes now—digital-first platforms that use customer data to process claims fairly and transparently. This would reduce the incentive for consumers to sign up with CMCs and demonstrate a proactive commitment to consumer protection.
The Real Test: Will the Industry Choose Reform or Resistance?
This isn’t just about managing legal exposure. It’s a reckoning with the culture of conflicted selling that remains endemic in financial services.
For years, consumers have been nudged, steered, or sold products through intermediary channels where incentives were rarely disclosed, and trust was assumed. The motor finance scandal forces us to confront the cost of this system—not just in pounds and pence, but in lost confidence.
If fiduciary standards become the new baseline—not just for IFAs, but for all brokers—it could usher in a more ethical, consumer-centric era of financial distribution.
But that depends on what happens next.
The Road Ahead
Should the Supreme Court rule in favour of consumers, a cascade of industry responses will follow:
- The FCA will likely formalise a redress framework by 2026, using Section 404 powers to enforce compensation without requiring litigation.
- Collective legal actions (GLOs) could be initiated by CMCs or legal firms, drawing attention and investor concern across financial markets.
- Investors will scrutinise exposure across multiple sectors, particularly where broker-led distribution is dominant.
For ethical financial planners, coaches, and independent consultants—this is a pivotal moment.
It underscores the need for transparency, education, and conflict-free service. It also affirms the Academy of Life Planning’s mission: to empower consumers and professionals alike to operate outside the old product-pushing paradigm.
The question is no longer whether the system will change, but how soon—and who will lead.
Your Money or Your Life
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By Steve Conley. Available on Amazon. Visit www.steve.conley.co.uk to find out more.
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