• The motor finance sector faces significant challenges in 2025 due to ongoing debates over undisclosed commissions and potential redress schemes. The UK Supreme Court is set to rule on whether motor dealers owe a fiduciary duty to customers, which could lead to substantial compensation claims for consumers affected by discretionary commission arrangements. The Financial Conduct Authority is considering an industry-wide redress scheme if the Supreme Court upholds the Court of Appeal's decision, potentially impacting lenders' financial stability and the availability of motor finance options.
• The motor and asset finance sectors face significant operational challenges due to litigation and redress threats, leading to increased operational expenditures and cautious lending practices. Non-performing loans have risen, and lenders might be relying on more expensive funding options, impacting profitability when alternative cheaper and more flexible funding solutions like securitisations should be explored. Ongoing regulatory scrutiny and potential FCA reviews continue to pose operational and financial risks for lenders and brokers. Management teams may face job insecurity, further complicating sector stability.
• Finance providers must assess the adequacy of disclosure in sales processes, particularly following the Court of Appeal's emphasis on full disclosure of commissions. The Supreme Court's upcoming decision will clarify the implications of partial disclosure, potentially influencing the FCA's redress approach. Firms should review historical agreements to identify non-compliance risks and prepare for potential liabilities based on the Supreme Court's ruling and any subsequent FCA actions.

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