Shares in UK banks jump after car loan court ruling
While the court upheld one of the three cases, it narrowed the overall grounds for claims, offering relief to banks that had been bracing for widespread payouts from millions of car buyers.
Shares in Lloyds Banking Group jumped seven percent and Barclays rose two percent in early trading on London's benchmark FTSE 100 index.
Close Brothers saw its stock surge more than 20 percent on the FTSE 250 after the court ruled in its favour in one of the cases reviewed.
The Supreme Court overturned rulings on two of the three cases but upheld one, based on specific circumstances -- including the high level of commission charged and the complexity of the contract involved.
Lloyds said on Monday the decision was unlikely to have an impact on the bank as it had already set aside nearly £1.2 billion ($1.6 billion) in preparation for the ruling.
Britain's financial watchdog said on Sunday it would consult on a redress scheme for affected consumers and warned banks could still face more than £9 billion ($12 billion) in compensation payments.
That figure, however, is far lower than the £44-billion bill expected by some analysts before the ruling.
The Financial Conduct Authority estimated most individuals will probably receive less than £950 in compensation.
In some cases, the loans -- available from 2007 to 2021 -- allowed car dealers to offer higher interest rates in return for a bigger commission from banks.
The ruling means that dealers have some leeway when arranging loans, without requiring explicit consent from borrowers for terms that may benefit lenders.
© 2025 AFP
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France 24
12 hours ago
- France 24
Shares in UK banks jump after car loan court ruling
The Supreme Court, in a ruling on Friday after markets closed, largely overturned earlier judgements that had found it unlawful for car dealers to earn a commission on loans stretching back to 2007 in which borrowers had not been properly informed about the payments. While the court upheld one of the three cases, it narrowed the overall grounds for claims, offering relief to banks that had been bracing for widespread payouts from millions of car buyers. Shares in Lloyds Banking Group jumped seven percent and Barclays rose two percent in early trading on London's benchmark FTSE 100 index. Close Brothers saw its stock surge more than 20 percent on the FTSE 250 after the court ruled in its favour in one of the cases reviewed. The Supreme Court overturned rulings on two of the three cases but upheld one, based on specific circumstances -- including the high level of commission charged and the complexity of the contract involved. Lloyds said on Monday the decision was unlikely to have an impact on the bank as it had already set aside nearly £1.2 billion ($1.6 billion) in preparation for the ruling. Britain's financial watchdog said on Sunday it would consult on a redress scheme for affected consumers and warned banks could still face more than £9 billion ($12 billion) in compensation payments. That figure, however, is far lower than the £44-billion bill expected by some analysts before the ruling. The Financial Conduct Authority estimated most individuals will probably receive less than £950 in compensation. In some cases, the loans -- available from 2007 to 2021 -- allowed car dealers to offer higher interest rates in return for a bigger commission from banks. The ruling means that dealers have some leeway when arranging loans, without requiring explicit consent from borrowers for terms that may benefit lenders. © 2025 AFP
France 24
21 hours ago
- France 24
UK lenders face $12 bn plus compensation bill despite court ruling: watchdog
The Supreme Court on Friday partially overturned judgments that the loans were unlawful, giving relief to banks which had been bracing for compensation claims from millions of car-buyers. It did, however, uphold one of the three cases, which allows the claimant to seek compensation. And in a similar but separate probe, the Financial Conduct Authority (FCA) said that the cost of any redress scheme relating to discretionary commission arrangements for car loans would likely be higher than £9 billion. "While there are plausible scenarios which underpin estimates of a total cost as high as £18 billion, we do not consider those scenarios to be the most likely and analyst estimates in the midpoint of this range are more plausible," the FCA said in a statement. The FCA estimates that most individuals will probably receive less than £950 in compensation. The court ruling had given the FCA "clarity... because we have been looking at what is unfair and, prior to this judgment, there were different interpretations of the law coming from different courts," it said. "It is clear that some firms have broken the law and our rules. It's fair for their customers to be compensated," said Nikhil Rathi, chief executive of the FCA. The Supreme Court decision mostly overturned Court of Appeal rulings last year that it was unlawful for car dealers to receive a commission on loans without sufficiently informing borrowers. In some cases, the loans -- available from 2007 -- allowed car dealers to offer higher interest rates in return for a bigger commission from banks. The ruling means that dealers have some leeway when arranging loans, without requiring explicit consent from borrowers for terms that may benefit lenders. The case that was upheld involved Marcus Johnson, who in 2017 bought a Suzuki Swift from a car dealer in Cardiff for £6,500 including loan costs -- unaware that interest on the loan amount would fund a commission of more than £1,600. When the Court of Appeal ruled in favour of Johnson, ordering FirstRand Bank, a South African based lender, to refund the commission plus interest, it sparked panic across the finance sector. That ruling was upheld by the top court due to the high level of commission Johnson was charged and the complexity of the contract setting out the fee, which limits the scope of other compensation claims.
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