The Supreme Court’s decision in Johnson v Firstrand [2025] UKSC 33, last Friday has significantly limited the scope of claims against lenders (and car dealers) for the payment of undisclosed commissions. The common law and equitable claims failed. Only the consumer claim for unfairness in Mr Johnson’s case succeeded (a similar claim brought by the Hopcrafts had already failed and was not appealed whilst Mr Wrench’s claims for unfairness had been remitted to DDJ Harrop for determination and was not a live issue before the Supreme Court). That will pave the way for others in similar positions to bring claims.
The surviving claims for compensation for unfair relationships pursuant to sections 140A-C of the Consumer Credit Act 1974 could be resolved through two distinct mechanisms: litigation in the courts and a redress scheme from the Financial Conduct Authority.
The many thousands of claims already issued were stayed pending the Supreme Court’s decision. The wording of most of those stays means that they will have automatically been lifted this morning. The various claims management companies have rolled large-scale advertising campaigns on the back of the claimants’ successes in the Court of Appeal and have no doubt signed up many more claimants with claims ready to be issued. Statements of case will be amended, evidence exchanged, and hearings listed. Both sides will no doubt feel confident of their prospects. Consumers will be able to rely on the findings in Johnson to say that the size of the commission in suitable cases makes it unfair whilst lenders, who do not have a secret right of first refusal, will distinguish Johnson and argue that the size of the commission on its own is not enough. The district bench may well find that the Supreme Court’s decision to only consider three factors of unfairness is not overly helpful given the wide variety of background fact patterns such that litigants can expect a wide range of outcomes. The Supreme Court’s overall reasoning on unfairness will be considered in a further article.
The second route by which consumers can claim compensation appears to be through the FCA. They have announced that they will begin a consultation on an automatic redress scheme. They have estimated that consumers may receive £950 per agreement. However, the consultation on that scheme will not begin until October. The Finance and Leasing Association has already criticised the FCA’s proposal on the basis that a redress scheme going back to 2007 will be unworkable given the inability to retain documents that long. That the FLA is critical of scheme which the FCA estimates will cost its members between £9bn and £18bn is unsurprising. Further difficulties will likely include drafting a compensation scheme which covers the diverse factual backgrounds as well as setting the compensation at such a level that both sides are content.
The FCA warns consumers against signing up with the claims management firms who could take as much as 30% of the compensation. They will mostly be advertising ‘no win, no fee’ schemes, with the corollary being that if there is a win, there is a fee. Consumers may well be lured by the promise of quicker decisions from the Courts than waiting for the FCA scheme to begin consulting in the autumn and with no prospect of pay-outs until the new year. Consumers can wait for an uncertain outcome from the FCA’s redress or move quickly and give up some of their compensation. Those consumers who already have live litigation, will no doubt have no option but to proceed to avoid paying an even larger costs bill. Lenders will be faced deal with the trifecta of dealing with the stayed claims being revived and the necessary applications in those claims, the wave of claims which had been stored awaiting this decision whilst at the same time making representations to the FCA as to the scheme and how they are to fund the scheme itself ahead of being forced into issuing pay-outs in the new year.
Uncertainty will hang over these claims for unfairness for consumers and lenders alike for many months to come as the County Courts will likely reach differing conclusions on different cases whilst the nature of the FCA scheme is entirely unclear. Lenders will not know which choice their customers will take, and those consumers may struggle to know for themselves which option is best.
Matthew Gillett
4 August 2025
