UK Car Finance Mis-selling Scandal: £300 Million and Counting

In October 2024, the UK Court of Appeal delivered a bombshell ruling in the case of Johnson v FirstRand Bank that sent shockwaves through the motor finance industry. The court found that car dealerships had been receiving secret commissions from finance companies when arranging car loans for customers — without disclosing these commissions to the buyers.

Under these arrangements, car dealers had the ability to set the interest rate on customer loans, with higher rates meaning bigger commissions for the dealer. This created a direct conflict of interest: dealers were incentivized to put customers on more expensive finance deals, and customers were never told about these hidden payments.

The ruling potentially affects millions of UK consumers who purchased cars using dealer-arranged finance over the past several decades. The FCA estimated that up to 40% of car finance agreements may have involved undisclosed commissions.

Financial analysts estimated the total industry liability could reach £30 billion — comparable to the PPI scandal. Major lenders including Close Brothers and MotoNovo Finance set aside hundreds of millions in provisions. Close Brothers' share price dropped by over 50% following the ruling.

The Supreme Court agreed to hear an appeal in April 2025, with a final ruling expected to have massive implications for the entire car finance industry and the millions of consumers who may be owed compensation.