Some of Britain’s lenders, including Close Brothers Group Plc and Lloyds Banking Group Plc, are awaiting a Supreme Court verdict after appealing a lower tribunal’s decision that deemed it unlawful on their part to pay car dealers commission to sell their loans without the consent of consumers.
Under Treasury contingency plans being discussed in the event that justices decide to uphold the entirety of a previous ruling that consumers are entitled to damages, the government would retrospectively change the law to cut liabilities for lenders, the Guardian said.
Close Brothers shares jumped as much as 12.6% in London, while Lloyds rose as much as 2.5%.
Lenders caught in the proceedings are bracing for huge payouts should judges rule against them. Analysts at Bank of America have previously estimated that the industry may face as much as a combined £38 billion ($51 billion) in costs tied to the lawsuits. The Supreme Court had said in April that its ruling is expected some time this month.
Officials have been discussing the feasibility of superseding the Supreme Court’s decision with the Ministry of Justice and Department for Business and Trade, the Guardian said. The move comes after months of lobbying by the Financing & Leasing Association, a lobby group for car lenders.
Retrospective legislation would also ensure that the issue does not balloon beyond car loans, and potentially expose lenders to complaints over commission payments across other financial products, like appliances and furniture, the newspaper reported.
“We don’t comment on speculation,” a Treasury spokesperson said. “We want to see a balanced judgment that delivers compensation proportionate to losses that consumers have suffered and allows the motor finance sector to continue supporting millions of motorists to own vehicles.”
A spokesperson for the FLA declined to comment.
–With assistance from Joe Mayes.
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