High-Stakes Court Battle Over Motor Finance Commissions Rocks UK's Lending Market

The UK's Supreme Court hears a pivotal appeal regarding motor finance commissions as major banks, including Close Brothers and FirstRand, seek to overturn a landmark ruling requiring full disclosure and informed consumer consent. The case could have wide implications for the entire consumer lending sector.

Major banks are on edge as a critical appeal over motor finance commissions is set to be heard at the UK's Supreme Court on Tuesday. This follows the Court of Appeal's decision necessitating full consumer consent for commission payments, which the financial watchdog is closely monitoring amid possible compensation schemes.

The appeal, spearheaded by Close Brothers and South Africa's FirstRand, aims to overturn a ruling that firms must have informed consumer consent to receive commissions. The judgment had severe market repercussions, affecting major players such as Banco Santander, Lloyds, and Barclays, and has left the car finance sector in turmoil.

If the Supreme Court sides with the lower court, the decision could have far-reaching effects beyond the car finance industry. Analysts predict that brokers may have to compensate consumers on a scale comparable to past payment protection insurance cases, with potential implications for consumer credit sectors across the UK.

(With inputs from agencies.)