Tue, 21 Jan 2025

Treasury steps in to protect car loan firms' payouts

The government is concerned major compensation for the mis-selling scandal could hurt the car industry.

* The government has intervened to block potential compensation payments worth billions of pounds to car loan customers, citing concerns that it could harm the motor finance market.
* Lenders and dealers were ordered by the Court of Appeal last year to clearly inform customers about commissions made from selling loans, but have been given permission to appeal the ruling in April.
* The UK government has submitted a document to the Supreme Court stating its concerns about the impact of compensation payments on the motor sector, arguing that it could undermine the country's competitiveness and make borrowing costs soar.
* Analysts estimate that total compensation payments could reach £30 billion, making it potentially the largest compensation scheme in history since the PPI saga.
* The Treasury's intervention is seen as an attempt to show that the UK is still a good place to do business, amidst concerns about Chancellor Rachel Reeves' budgetary decisions and rising borrowing costs.
* Customers who were missold car loans are now expected to receive compensation, with some receiving payouts of over £3,000.
* The Financial Conduct Authority banned deals where dealers received commissions from lenders in 2021, but is still considering whether to pay compensation to affected customers.
* The government's intervention has been welcomed by the car finance industry, which sees it as a way to protect their competitiveness and avoid multibillion-pound fines.
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