Major South African bank gears up for huge UK battle

South Africa’s most valuable bank, FirstRand, is set to engage the United Kingdom’s financial regulator following the release of what it deems to be an unfair proposal.

This matter arose from a dispute surrounding transparency concerns in how dealers earn commissions from lenders.

It involves JSE-listed banking group FirstRand, which owns FNB, RMB and Wesbank. The financial services group operates in South Africa, and certain markets in sub-Saharan Africa, the UK, and India.

In October 2024, the UK Court of Appeal found that FirstRand and other lenders unlawfully arranged motor finance deals without properly disclosing commissions paid to car dealers. The lenders were also accused of not obtaining fully informed consent from customers.

FirstRand appealed this decision to the UK Supreme Court, arguing that motor dealers should not owe fiduciary duties to consumers and that its past practices were compliant with then-existing laws.

On 1 August 2025, the Supreme Court largely overturned key parts of the Court of Appeal’s ruling.

Specifically, it rejected fiduciary duties but upheld one “unfair relationship” ruling, finding that a lender had acted unfairly because of the high, undisclosed commission paid to the broker and the failure to disclose a contractual tie.

The UK Supreme Court also clarified that unfairness should be assessed on a combination of multiple, specific facts.

FirstRand has almost doubled provisions to R6.26 billion to cover the potential compensation and other costs linked to this case.

On 7 October 2025, the UK’s financial regulator, the Financial Conduct Authority (FCA), released a statement proposing a redress scheme for commission practices in the UK motor finance industry.

The regulator said a compensation scheme is the best way to ensure consumers who have lost out receive fair compensation in an orderly, consistent, quick, and efficient way, while ensuring a well-functioning and competitive motor finance market.

“An alternative to a compensation scheme would require consumers to complain to firms, then to the Financial Ombudsman Service if dissatisfied with the firm’s response, or through the courts,” the FCA said. 

“This would result in significantly higher administrative and legal costs for firms and consumers, lengthy delays and uncertain outcomes for all involved.”

The redress scheme and FirstRand’s response

The FCA said many firms broke laws and regulations in force at the time by failing to disclose important information.

Based on an extensive review, the FCA found widespread failures to adequately disclose the existence and nature of commission and contractual ties between lenders and brokers.

The regulator specifically looked into agreements involving a discretionary commission arrangement (DCA), where the broker could adjust the interest rate offered to a customer to obtain a higher commission.

In its review, the regulator found no evidence that the customer had been told about the DCA.

“Inadequate disclosure means consumers were unable to make informed decisions and less likely to negotiate or shop around. Consequently, many may have overpaid on car finance,” it said.

The regulator said there is now sufficient legal clarity to proceed with a compensation scheme, which would launch later in 2026.

In a statement released on Wednesday, 8 October, FirstRand said it plans to consult the FCA on its proposed redress scheme.

“Whilst more time is required to fully review the statement, the group’s initial view is that the scheme appears to have moved beyond the group’s expectations of what can be considered proportionate or reasonable,” FirstRand said.

“In addition, the presumptions of unfairness in the scheme in its current form do not appear to be applying the legal clarity provided by the recent UK Supreme Court.”

FirstRand said it would consult with the FCA as soon as possible to understand these issues better and gain clarification on some data inconsistencies included in the regulator’s consultative paper. 

“Once the group has more clarity regarding its next steps, which could be earlier than the six week period set out by the FCA, it will immediately update shareholders,” the bank said.