As we come to the end of 2025, it has certainly been a busy period in terms of activity on the regulatory horizon. Most recently, this has centred on the motor finance market. I wanted to take this opportunity to tell members about what’s happening in this sector, in particular around the subject of commissions.

No doubt, most will be well aware of developments in the motor finance legal cases, but we now have another consultation on Buy-now, Pay-later products as well as a response from the Financial Ombudsman Service on their views for proceeding with proposals to charge claims management companies (CMCs). So, there is a lot to focus on before we all start to wind down for Christmas.

However, I think I can comfortably say that the matter of commissions in the motor finance sector will continue to dominate well into 2025.

Aspects of the Court of Appeal decision on 25 October took the industry by surprise. The fallout of that decision led to some lenders temporarily pausing further lending. Similarly, it caused a degree of uncertainty in the industry. What did the decision mean for lenders and brokers? Was the decision going to be appealed? Should industry be making changes now or wait for an appeal, if any?

I know that we certainly liaised with many of our members in respect of such questions and issued insights from the wider engagement we undertook, such as from dialogue with legal professionals, other trade associations and the FCA. Our latest motor finance roundtable was also dominated by the subject of commissions.

The Court’s decision led to the industry focusing on understanding what ‘fiduciary duty’ was and how this needs to be discharged. The spotlight was on understanding ‘half secret’ and ‘fully secret’ commissions and where liability would fall if the duty of the broker was not discharged. But without a doubt, the biggest shock from the Court’s decision was around informed consent. They ruled that it expected the defendants to not only disclose commission amounts and the calculation of the arrangement, but it also expected the defendants to obtain the customer’s informed consent.

Up until this point, there have never been any legal or regulatory requirements to obtain a customer’s informed consent. The further concern was that this decision, therefore, does not only apply to discretionary commission arrangements, but commission arrangements in general, including fixed or flat rate commission.

This was a surprise, given that even the FCA was not concerned about other types of commissions. Their current review into commission arrangements only covered discretionary commissions, and not fixed or flat rate commissions. But, when I say that the matter of commissions will continue to dominate well in 2025, we know that the defendants have lodged an appeal with the Supreme Court. This was done ahead of the 22 November deadline.

The CCTA believes that an appeal was important, given the fact that the Court of Appeal decision now has wider implications on the motor finance market and brings into scope all types of commission arrangements in general, and not just discretionary arrangements. In fact, there is potential for wider impact into other sectors too, not just motor finance.

The CCTA are working with legal professionals to support the appeal application. Given the impact on market integrity, we believe it is crucial that the Supreme Court not only accepts an appeal hearing but does so quickly.

There is potential for wider impact into other sectors too, not just motor finance.

To answer some member questions around the appeal, I should highlight a few points. Firstly, the Supreme Court is not required to take on any appeal. It could decide not to. If it does take on the matter, we certainly won’t be seeing any decision or ruling any time soon. I understand that even a fast track hearing could easily take between twelve to fifteen months.

Nonetheless, whilst an appeal progresses on the legal front, we are also continuing to liaise with the FCA. It is clear that firms are doing their best to align with the Court of Appeal’s decision, whether there is an appeal or not. Firms are addressing their fiduciary duty, commission disclosures and informed consent in slightly varying ways.

There are certainly no set or preferred approaches from what we have seen. This is why we are pushing the FCA to issue support and guidance to the industry to ensure that there is alignment. We need to know what they expect from firms and how they would like to see these aspects addressed.

So, this matter will certainly continue to progress in 2025. Whilst we hope to see the appeal accepted by the Supreme Court, and quickly, we will continue to represent not only our members, but the wider sector through our advocacy, campaigning and insight activities.

We will, of course, keep all our members updated of key developments, as and when they happen, but keep talking to us if this is a priority matter for you.