FirstRand has won an important victory in the UK Supreme Court on the motor finance commissions case that has been hanging over the bank and its UK competitors, but will now have to wait for details of the redress scheme that the UK regulator plans to implement to compensate customers who were overcharged.
The banking group, which last year set aside a R3bn accounting provision for the motor finance case, said on Monday it might have to increase the provision. Should this be the case, normalised earnings growth for the year would trend closer to the bottom end of the guidance it provided in June, said FirstRand, which is due to report its June year-end result on September 11.
It welcomed the Supreme Court judgment, which found car dealers who arranged finance for customers did not owe a fiduciary duty to them and that banks were therefore not liable. But it said it was working through the UK Financial Conduct Authority’s (FCA’s) initial thinking on a proposed redress scheme. The FCA has said the scheme will now include an unfairness criterion, after the court found unfairness should be considered on a fact specific basis.
Reuters reported that the UK’s top court on Friday overturned a landmark ruling on car finance commissions in a decision that was likely to ease fears among banks about a redress scheme some analysts had warned could run into tens of billions of pounds.
This came after the FirstRand London branch in December obtained permission from the Supreme Court to appeal the UK Court of Appeal’s judgment against it regarding the Wrench and Johnson motor finance commissions cases. The appeal was heard by the Supreme Court between April 1 and 3.
The Supreme Court reversed a 2024 decision that sent shock waves through the motor finance industry and weighed heavily on the stocks of the most exposed players.
Lenders are likely to still face claims for overcharging in some cases under a compensation scheme, though the extent of the total bill is likely to be significantly reduced. The FCA has indicated a range of £9bn-£18bn for UK banks’ collective compensation bill, well below the market’s £30bn-£40bn worst case estimates, according to UK media reports.
“FirstRand welcomes the clarity provided by the judgment,” the group said in a voluntary update.
FirstRand said it was working through the full implications of the FCA’s current proposals, which were still not finalised and subject to change, and would continue to engage with the regulator.
The FCA will publish its consultation process by early October, which will run for six weeks, and aims to finalise the rules such that the scheme can launch in 2026, with consumers starting to receive compensation next year.
“The group believes an important reference point to highlight is that its own internal data indicates that over an 18-year period agreements that had a commission as a percentage of the cost of credit of 55% or above (the UK Supreme Court reference for the Johnson case) represents a small proportion or 4% of total agreements and only 7% of the total commissions paid over the period,” it said.
Based on early assessments of the data and assuming that all such customers fall under the FCA’s unfairness criteria for the redress scheme, the group may be required to update its accounting provision for the year to end-June 2025, FirstRand said. This would include updating its various probability weighted scenarios as well as using the FCA’s proposed interest rate of the average base rate per year plus 1%.
“Should this be the case, normalised earnings growth for the year would trend closer to the bottom end of the current guidance range provided in the trading update on June 25 2025, which stated: ‘The group now expects to deliver full-year earnings growth of low double digit to mid teens.’”
By market close on Tuesday FirstRand’s share price was up 2.44% to R77.66.
With Hilary Joffe
Update: August 4 2025
This story has been updated with new information.
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