Treasury Intervenes in Landmark Car Loan Case

The UK Treasury is stepping into a significant car loan mis-selling case to protect the motor finance industry from a hefty compensation payout. This intervention comes as a court ruling threatens to destabilize the sector, impacting consumer loan accessibility and financial stability.

The British finance minister, Rachel Reeves, has announced an intervention in a critical car loan mis-selling case, aiming to protect the motor finance industry facing a potential multi-billion pound payout to consumers. This move highlights the significant implications for the sector's financial stability.

The Treasury expressed its concerns over a court judgment from October that could severely impact the car finance industry. With 80% of new vehicles in the UK financed, the ruling poses a risk to loan access. The Treasury plans to present its stance in an appeal to the Supreme Court, supporting car loan providers challenging the pro-consumer decision made by the Court of Appeal.

Positive reactions from the market followed the news, as shares of affected companies like Close Brothers and Lloyds soared. Initial judgments had severely impacted these stocks, with analysts predicting a potential total compensation bill of £16 billion. The Treasury argues for a fair judgment balancing consumer compensation with industry sustainability, questioning the proportionality of the Court of Appeal's redress approach.

(With inputs from agencies.)