Supreme Court Rejects Treasury Intervention in Car Finance Scandal
London - The Supreme Court has declined to allow Chancellor Rachel Reeves to intervene in the car finance mis-selling scandal, paving the way for potential multi-billion pound compensation payouts to affected drivers.
The Treasury had argued that the scandal threatened the UK economy and deterred investment, calling for limits on payouts. However, the court rejected this application on Tuesday, allowing the Financial Conduct Authority (FCA) as the sole intervener.
The case concerns whether car salesmen are obligated to disclose bonuses or commissions earned from selling loans to finance vehicle purchases. An earlier ruling suggested they do, potentially leading to widespread legal claims.
Estimates suggest the compensation bill could reach £38 billion, prompting the Treasury's attempt to shield banks from lawsuits.
The Supreme Court's decision sent shares in banks plummeting on the FTSE 100. Lloyds Bank, among the most heavily affected, fell by 1.9%.
The FCA has also expressed concerns over the potential destabilizing impact on the banking industry, requesting separate intervention.
Experts highlight the continuing uncertainty over the scandal's outcome. Gary Greenwood of Shore Capital notes that "the process will be far from straightforward in its resolution."
The Supreme Court is reviewing an October ruling by the Court of Appeals that overturned established conventions. Close Brothers and FirstRand (owner of MotoNovo) have appealed this ruling.
The Treasury and FCA's intervention requests were initially met with a surge in lender share prices. However, the Supreme Court's decision has reversed this trend.
A Government spokesperson commented: "We respect the Court's decision and will monitor the case closely."