Reeves aims to back UK lenders in vehicle financing case

London — British finance minister Rachel Reeves is seeking to intervene in a landmark car loan mis-selling case in an effort to shield the motor finance industry as it faces a potential multi-billion pound payout to consumers.

Britain’s Treasury is worried that a court judgment handed down in October, if allowed to stand on appeal, would make it hard for consumers to get car loans. About 80% of new vehicles in the UK are bought on finance.

It said on Tuesday it would express its concerns in an upcoming Supreme Court appeal brought by lenders against the earlier Court of Appeal ruling that it was unlawful for car dealers to receive a commission from banks providing motor finance without obtaining the customer’s informed consent.

Shares in Close Brothers and Lloyds jumped on Tuesday after the Financial Times first reported the Treasury’s bid to intervene, with Close rising 20% and Lloyds gaining 4.3%.

“We want to see a fair and proportionate judgment that ensures compensation to consumers that is proportionate to the losses they have suffered, and allows the motor finance sector to continue playing its role in supporting millions of motorists to own vehicles,” a Treasury spokesperson said in a statement.

Analysts had earlier estimated banks could face a £16bn compensation bill, making it one of the sector’s most costly consumer compliance failures.

The Treasury will argue that the uncertainty caused by the judgment could undermine confidence in UK financial regulation.

“It is a potentially bad look for the UK if lenders who did not breach statutory law and followed the regulatory rules on disclosure could face a retrospective liability,” analysts at Jefferies said in a note.

The UK arm of Spain’s Banco Santander had set aside £295m to cover possible costs related to an ongoing regulatory review into charging by car finance lenders.

SA’s FirstRand and Investec had also raised provisions in respect of the probe.

Lloyds has also set aside a £450m provision to cover possible redress.

Reuters