If you arrange finance and get paid commission for it, you must tell the buyer, prominently and before they sign, that commission exists, what form it takes and how it could affect what they pay. If they ask how much, you must tell them the amount, or a likely amount. And since 28 January 2021, commission that rises when you set a higher interest rate has been banned outright.
That part is settled. What is still moving is the clean-up of older agreements, so this guide splits the two clearly.
This is general guidance, not legal advice. Finance rules are set by the FCA and your lender agreements, so check current guidance and take advice on your own arrangements.
Why this matters to a dealer, not just the lender
When you introduce a buyer to a lender, you are acting as a credit broker. That is a regulated activity, which is why you either hold your own FCA permission or work as an appointed representative of a firm that does.
Most of the noise over the last two years has been about lenders and compensation. But the rules that started it are broker rules. They are about what happens at your desk, in your showroom or on your website when a buyer says "can I get finance on that?"
The rules you follow today
These are the current rules in the FCA's consumer credit sourcebook (CONC). They apply now, to every deal.
Disclose that commission exists, and its nature. Under CONC 4.5.3R, a credit broker must prominently disclose, in good time before the credit agreement, the existence and nature of any commission or other payment from the lender, where it could affect your impartiality or could materially affect the buyer's decision. For a dealer, assume it does.
Explain how it could affect the price. CONC 4.5.3AR adds that you must explain, at the same time and with equal prominence, how the commission may affect the amount the buyer pays. A line buried in the small print does not meet "equal prominence".
Say if commission varies. FCA guidance at CONC 4.5.3BG says that if your commission varies by lender or by product, you should say so. General terms are fine, as long as the buyer can understand the effect. You do not have to give a tailored calculation for each buyer.
Give the amount if asked. Under CONC 4.5.4R, if the buyer asks, you must tell them the amount of commission, or the likely amount if you do not know it exactly, before they sign.
No discretionary commission. CONC 4.5.6R bans discretionary commission arrangements, where the broker can set or adjust the rate and earns more for a higher rate. The ban took effect on 28 January 2021 under PS20/8.
Be straight about who you work with. CONC 3.7.3R requires your financial promotions and broking documents to say whether you work exclusively with one lender, with several, or independently. Guidance says you should only call yourself independent if you genuinely offer a broad range of products without being tied.
What the Supreme Court decided in August 2025
In October 2024 the Court of Appeal ruled against the lenders in three test cases (Johnson, Wrench and Hopcraft), which caused a lot of alarm on forecourts. The lenders appealed, and the Supreme Court gave judgment on 1 August 2025 in [2025] UKSC 33.
In plain terms:
Dealers do not owe buyers a fiduciary duty. The Supreme Court overturned the Court of Appeal on this. Arranging finance does not make you the buyer's trusted adviser in the legal sense, and the bribery and fiduciary claims failed.
But a relationship can still be unfair. In Mr Johnson's case, the court found his relationship with the lender was unfair under section 140A of the Consumer Credit Act 1974, and ordered the lender to repay the commission with interest.
Why Johnson lost the lender the case. The court pointed to three things together (para 340). The commission was large, £1,650.95, which was 55% of the total charge for credit. It was not properly disclosed, which the court said breached CONC 4.5.3R. And the dealer had a tie giving one lender first refusal on its business, while the paperwork suggested the buyer was getting a choice from a panel. The court called that "suppression of the truth".
Non-disclosure alone is not automatic. The court was clear that failing to disclose commission "will not necessarily suffice of itself" to make a relationship unfair. It is weighed alongside size, how it was presented and the buyer's circumstances. A commission term without prominence, buried in standard terms, carried little weight.
For a dealer, the lesson is practical. Commission is lawful. A big commission, hidden, combined with paperwork that misdescribes your lender relationships, is where the trouble starts.
The FCA redress scheme: where it stands in October 2026
After the judgment, the FCA said on 3 August 2025 that it would consult on an industry wide compensation scheme. It published final rules in PS26/3 on 30 March 2026.
What is decided on paper. According to the FCA's announcement, the scheme covers motor finance agreements taken out between 6 April 2007 and 1 November 2024. A buyer can be eligible if they were not clearly told about at least one of three arrangements:
- a discretionary commission arrangement
- high commission, meaning at least 39% of the total cost of credit and 10% of the loan
- a tied arrangement, where the broker used one lender or gave one lender first refusal (with an exception where links to a manufacturer and franchised dealer were visible)
The FCA estimates around £7.5bn in total and an average of around £830 per agreement.
What is not settled. The scheme is under legal challenge. On 2 July 2026 the Upper Tribunal partially suspended it. Until that process ends, lenders do not have to calculate or pay compensation, or send compensation letters, on the scheme timetable. Other parts still apply, including lenders gathering commission and disclosure data. The FCA has listed the main hearing for either 14 to 18 December 2026 or 16 to 26 February 2027.
So, as of 7 October 2026, nobody can tell you for certain when payments will be made, or whether the final scheme will look exactly like PS26/3. Check the FCA website for the latest position before you tell a customer anything about it.
What the scheme means for your dealership
The scheme puts the duty to pay redress on lenders, not dealers. But dealers are not out of the picture.
Lenders will ask you for paperwork. The FCA's July statement says brokers must give lenders the requested documents, or confirm they do not hold them, within one month of a request. If you arranged finance any time since 2007, expect requests for old deal files, disclosure documents and commission records.
Your lender agreements matter. Whether a lender could seek to recover anything from you depends on the agreement between you. Read yours, and take advice if you are worried.
Customers will ask you questions. A buyer who saw the news may ring you rather than their lender. The FCA's consumer message is that complaining to the lender directly is free, and that people do not need a claims firm. Pointing them to their lender is the honest answer.
A simple disclosure routine for every finance deal
None of this needs a compliance department. It needs the same steps on every deal.
- Put the disclosure up front. A short, plain statement shown before the application: you are paid commission by the lender, it is a fixed amount or a percentage, it may affect the price of the credit, and you will tell them the amount if they ask.
- Describe your panel honestly. One lender, a handful, or a wide panel. If you have a tie or first refusal arrangement, say so.
- Know your numbers. Have the commission amount, or a likely amount, ready before the buyer signs, so you can answer straight away.
- Get it signed and keep it. A signed copy of the disclosure, kept with the deal, is your evidence years later. Electronic signatures make that quick, and keeping the document against the sale record means you can find it when a lender asks.
- Check your website too. Finance calculators and "apply now" buttons are part of the journey. Your status disclosure and commission wording should be on the page, not just the paperwork.
In Vehiso, the dealer management system keeps the vehicle, the customer, the invoice and signed documents together, which is exactly what you need when a lender sends a document request for a deal from years ago. If you run finance quotes on your website, our finance integrations page covers the calculators we connect to.
Frequently asked questions
Is it legal for a car dealer to earn commission on finance?
Yes. Commission on motor finance is lawful, and the Supreme Court's 2025 ruling did not change that. What the FCA rules require is that you disclose it prominently, explain how it may affect the price, and give the amount if asked. Discretionary commission linked to the interest rate has been banned since 28 January 2021.
Do I have to tell every customer exactly how much commission I earn?
Not automatically. CONC 4.5.3R requires you to disclose that commission exists, its nature and how it could affect the price. CONC 4.5.4R requires you to give the amount, or a likely amount, if the customer asks. Many dealers choose to show the amount anyway, because a large commission that was hidden was central to the Johnson case.
Do dealers have to pay compensation under the FCA redress scheme?
The scheme places the duty to pay redress on lenders. Dealers are affected because lenders can ask brokers for documents, and brokers must respond within one month. Whether a lender can seek to recover anything from a dealer depends on the contract between them, so check yours and take advice.
When will motor finance compensation be paid?
That is not settled. The Upper Tribunal partially suspended the scheme on 2 July 2026, and lenders do not have to calculate or pay compensation until the legal challenges are resolved. The main hearing is listed for December 2026 or February 2027, so check the FCA website for the current position.
What should I say to a customer who asks about a car finance claim?
Keep it simple and factual. The FCA says customers can complain to their lender for free and do not need a claims management company or law firm. Avoid predicting whether they will get money or how much.
