British lenders are heading to the supreme court in a battle over a ruling that could propel a car finance scandal to new heights, prompting fears of a massive compensation bill. Two specialist lenders, Close Brothers and FirstRand, are challenging three consumers who collectively won a court of appeal case in October.
The ruling stated that failing to disclose commission paid to dealers was unlawful, and its implications are feared to be far-reaching. A £44bn compensation bill is projected, comparable to the £50bn cost of the payment protection insurance (PPI) saga. Analysts estimate that this could have significant implications for the financial services industry and inbound UK investment.
Government intervention has already prompted concerns over the potential fallout, with some lenders putting aside billions in provisions. The Treasury has warned judges against handing “windfall” compensation to borrowers, fearing it could cause economic harm. If the supreme court rules in favor of consumers, lenders may have to proactively contact borrowers and offer compensation, dealing a blow to claims management firms.
The car loans scandal is expected to run for three days before Lord Reed and other judges. The high-profile case has already sent shockwaves through an industry spooked by potential fallout. The supreme court’s decision will be closely watched, with memories of the PPI saga still fresh for many banking executives.
Source: https://www.theguardian.com/business/2025/mar/29/banks-aim-to-reverse-crunch-appeal-court-victory-for-car-buyers