BRITISH motorists could lose up to £30 billion in compensation after Chancellor Rachel Reeves’ recent intervention.
The Chancellor’s move will look to protect banks from mis-selling claims linked to car finance – with the case reaching The Supreme Court.
The allegations state that car dealers received secret commissions from lenders, leading to higher interest rates on loans.
But according to the Daily Mail, Treasury officials argue that the ruling could cause economic harm and impact motor finance availability.
Two lenders, FirstRand Bank and Close Brothers, are to appeal the judgement, while other major lenders like Lloyds and Santander are also potentially affected.
Consumer groups have been urging drivers to send complaints to the Financial Ombudsman, but concerns have grown over a potential consumer free-for-all leading to market destabilisation.
Now, Reeves is being accused of giving finance firms a “get out of jail free card,” according to insiders.
Her move could harm consumer interests and market stability, while the ruling has already caused chaos in the car market, with dealerships pausing deliveries to rewrite contracts.
Analysts warn that the government’s intervention risks setting a dangerous precedent, while consumer champion Martin Lewis questions the validity of retrospective claims.
Recent data suggests some 80% of vehicles in the UK are bought through finance, with two million cars purchased on finance in 2024 and seven million currently under finance agreements.
Many of these agreements belong to people on low incomes who cannot afford to buy a car outright.
Treasury figures are concerned that upholding the ruling would lead to lenders exiting the market, reducing finance options for consumers and potentially increasing costs.
[bc_video account_id=”5067014667001″ application_id=”” aspect_ratio=”16:9″ autoplay=”” caption=”‘It’s the next PPI’ – Top lawyer claims Brits due ‘billions’ over dodgy car finance deals… here’s how to make your claim” embed=”in-page” experience_id=”” height=”100%” language_detection=”” max_height=”360px” max_width=”640px” min_width=”0px” mute=”” padding_top=”56%” picture_in_picture=”” player_id=”default” playlist_id=”” playsinline=”” sizing=”responsive” video_id=”6351743970112″ video_ids=”” width=”640px”]The Financial Conduct Authority previously required dealers to disclose commission payments only if asked, but the October ruling has forced a hurried rewriting of contracts to explicitly state commission amounts.
The Supreme Court appeal, set for April, will be crucial in determining the future of compensation and the stability of the motor finance market.
Financial services firm Moody’s has estimated that if the ruling stands, the payout bill could reach as high as £30 billion.