From Yahoo Finance: 2025-03-27 02:08:00

The Supreme Court of the United Kingdom will hear arguments to overturn a ruling that could cost the financial industry billions in legal costs and compensation. Lenders paid commissions without customer consent, leading to potential remedies for affected borrowers. Lloyds, Close Brothers, and Santander have set aside over 1.5 billion pounds for claims.

The Supreme Court will review claims against FirstRand and Close Brothers to determine car dealers’ responsibility to provide information to consumers. If a duty of care is owed, the court will decide if commissions were undisclosed and if lenders are liable. The judgment is expected in the summer.

The FCA banned discretionary motor finance commissions in 2021, but customers claim they were treated unfairly. If the Supreme Court rules on transparency, a compensation scheme may be consulted within six weeks. Over 2 million people rely on motor finance annually, with potential industry costs reaching 30 billion pounds.

Major banks like Lloyds, Close Brothers, and Santander have made provisions for potential costs, but other commissions could face scrutiny. Moody’s estimates industry costs at 30 billion pounds, with RBC Capital projecting nearly 18 billion pounds impact. The outcome of a separate legal dispute could influence the ruling.

The banking industry’s future remains uncertain amidst potential liabilities. Banks eye mergers and acquisitions, but the scandal looms large. Clarity on the ruling and compensation scheme could revive M&A activity, unlocking cash reserves. ($1 = 0.7738 pounds)

Read more: Explainer-Is Britain on the cusp of another multibillion-pound consumer finance scandal?