The UK Supreme Court is set to deliver its verdict on Friday in the £44 billion car finance scandal, a decision that could open the door for millions of motorists to claim compensation for mis-selling. The judgment, expected after financial markets close at 4:35pm, will determine whether hidden commissions paid by lenders to car dealers were unlawful.
The case stems from an October ruling by the Court of Appeal, which found that such undisclosed payments to brokers arranging car loans were illegal. Lenders FirstRand Bank and Close Brothers appealed that decision, and the Supreme Court's ruling will either uphold or overturn it. If upheld, the decision could lead to billions in compensation claims, creating significant liabilities for lenders.
Lloyds Banking Group, heavily exposed through its Black Horse division, has already set aside £1.2 billion for potential payouts. The industry, represented by the Financing & Leasing Association, maintains it has acted lawfully. Meanwhile, the Financial Conduct Authority (FCA) is expected to establish a central compensation scheme for loans mis-sold through discretionary commission arrangements (DCAs), which were banned in 2021. The FCA has said it will confirm plans within six weeks of the Supreme Court's judgment.
If the justices uphold the appeals court decision in full, the pool of potential claimants could widen significantly. Conversely, if they side with lenders, the scope of payouts will be much more limited. The Treasury has urged a balanced judgment to compensate consumers while protecting the car finance sector's ability to support motorists.
