The UK’s Supreme Court is set to hear a case that could cost the financial industry billions of pounds in fresh legal costs and potential customer compensation. Lenders such as Lloyds Banking Group, Close Brothers, and Santander UK have already set aside over £1.5 billion to cover potential claims.
The court will review three earlier cases involving South African lender FirstRand and Britain’s Close Brothers, determining the extent of car dealers’ legal responsibility when acting as credit brokers. Analysts say the fallout could be costly for banks, with total industry costs potentially reaching £30 billion.
Several major British banks are concerned about a damaging consumer finance scandal, which could impact their merger and acquisition plans. Clarity over the ruling and any compensation scheme is expected to unlock cash set aside for legal expenses and revive M&A activity.
The Financial Conduct Authority has banned discretionary motor finance commissions, but some customers claim they were treated unfairly before the ban came into effect. If the Supreme Court rules that lenders should have been more transparent about commissions, the regulator will consult on a compensation scheme within six weeks.
Over 2 million people rely on the motor finance market to buy cars each year, and some lenders are already concerned about the potential impact of this ruling.
Source: https://www.reuters.com/business/finance/is-britain-cusp-another-multibillion-pound-consumer-finance-scandal-2025-03-27