The government has intervened to stop car loan firms from potential multi-billion pound compensation payments over concerns they could have a significant and potentially damaging impact on the motor finance market. Last year, the Court of Appeal said that lenders and dealers should have communicated clearly to customers how much commission they were making from selling loans, and compensate them when this did not happen. MotoNovo and Close Brothers, two of the UK’s biggest car finance firms, will appeal the ruling in April after hundreds of thousands more customers came to the financial regulator with similar complaints of being missold car loans. The government said that while it wants to make sure customers get re-dressed, it also wants the motor sector to be able to continue “supporting millions of motorists to own vehicles”. The vast majority of new cars sold in the UK, and many second-hand ones, are bought with finance agreements. Some analysts estimate that total payments could reach as much as £30bn in a scandal that could end up being the largest compensation scheme regarding financial products since the payment protection insurance (PPI) saga. As well as the size of the compensation bill, the Treasury’s submission to the Supreme Court – which it confirmed to the BBC it has received – includes concerns that any uncertainty could undermine the UK’s competitiveness. The Treasury’s intervention could be to show that the UK is still a good place to do business and emerges as Chancellor Rachel Reeves is at the World Economic Forum in Davos, Switzerland to speak to world leaders.
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