On August 1 2025, the UK Supreme Court overruled an earlier Court of Appeal decision regarding the relationship between car dealerships and their customers. The Justices decided that car dealers do not owe a fiduciary duty to customers arranging finance. This is set to ease any financial burdens on banks concerning hidden car finance commissions.  

What is a Fiduciary Duty?  

A fiduciary duty usually arises when one party places a significant level of trust and confidence in the other, such as between a doctor and patient or a solicitor and their client. This is one of the highest standards of duty imposed by the common law since it often encompasses various related duties such as the duty to avoid conflicts of interest.  

Overview  

The UKSC delivered an important decision on Friday, 1 August 2025, which is set to reverse the billions of pounds of compensation that car dealer customers could have claimed under the earlier Court of Appeal ruling. Following the Supreme Court decision, consumers who claim to have been misled by hidden commissions on car loans can no longer claim that they are owed money back. The court rejected the notion that dealers ought to act with undivided loyalty, thus undermining the existence of any fiduciary duty between them.  

 

How Legal Teams Get Involved  

One of the consumers claiming back his commission was represented by HD Law and Clifford Chance acted for the banks in defending against the consumer claims.  

Here is a breakdown of the key law firm departments which usually work on such matters:  

Litigation & Dispute Resolution: This team handles the procedural aspects of filing a claim in court, considers potential alternative dispute resolution (ADR) mechanisms, and abides by the court timelines set out in the Civil Procedure Rules (CPR).  

Banking & Finance: Clifford Chance has established a Banking & Finance team that specialises in consumer finance, consumer credit laws, and loan agreements. The lawyers working on this matter must convince the court that the commission mechanism imposed by the car dealers is standard market practice and was not calculated to deceive consumers.  

Financial Services Regulatory: Interpreting financial services regulation frameworks published by the Financial Conduct Authority (FCA), focusing on fair lending and contractual representations. Under UK law, misrepresentation or the provision of misleading information in loan documents is a serious offence carrying heavy penalties.  

Corporate and Commercial: Ensuring that the banks wouldn’t be strategically disadvantaged by an adverse outcome in the case. The decision of the Supreme Court favours the banks as it reduces the scope of any potential compensation claims through the no-fiduciary-duty principle.  

Insurance and Reinsurance: Banks are parties to hundreds of insurance policies to cover potential liabilities, especially those arising from pending or ongoing litigation. The insurance teams in various law firms assist insurers in understanding any possible claims from such cases. Their primary focus would be to explain to their clients whether such a ruling would trigger any indemnity claims under their policies and how they would be compensated for any loss. 

Future Outlook  

The UKSC’s ruling on car finance arrangements and commissions provides some relief from claims against banks. It limits the scope of potential compensation claims, which are often spurious and unfounded, by establishing that car dealers do not owe a fiduciary duty to their customers. However, in the long term, regulators may put forward redress schemes to favour consumers once again. This calls for greater transparency in car finance agreements, and lenders and consumers must act fairly and proportionately.