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British treasury steps in on car-finance case

The British government is to intervene in a Supreme Court case which has the potential to turn the country’s motor-financing market upside down, according to the Law Society Gazette of England and Wales.

The case to be heard in April follows three linked Court of Appeal judgments last October, which found certain commissions paid to car dealerships for arranging loans to be unlawful.

The Gazette says that the decision could open the way for thousands of customers to claim redress.

Wider economy

Chancellor Rachel Reeves has taken what the Gazette describes as “the unusual step” of sanctioning the British government to make representations when the Supreme Court hears the appeal from motor-finance companies.

The Gazette understands that the Treasury is concerned that the Court of Appeal ruling could damage the motor-finance industry and the wider financial sector. The Treasury cites figures from ratings agency Moody’s that consumer claims could top Stg £30 billion.

Treasury lawyers are expected to stress the potential implications of the judgment on the wider economy and argue that the court has not considered the role of the Financial Conduct Authority (FCA) in ensuring fairness for consumers.

‘Disproportionate’ redress system

The key submission, according to the Gazette, is likely to be that the uncertainty caused by refusing the appeal could undermine Britain’s competitiveness by creating a redress system disproportionate to any detriment incurred by motorists.

In the year to September 2024 more than two million cars were bought on finance. Over seven million such finance agreements are outstanding.

The motor finance market is particularly important in supporting purchases of new cars, with approximately 80% of new vehicles bought on finance.

Claimant lawyers say that a potential surge in claims could cost lenders up to £24 billion, with claims-management companies and law firms standing to receive up to 50% of compensation pay-outs.