Close Brothers has been granted permission by the UK’s highest court to appeal against a landmark ruling on hidden motor finance commission, sending bank shares higher on Wednesday.
The banking group submitted an application to the Supreme Court to challenge an earlier judgment in the Court of Appeal.
It will mark the latest development in the looming crisis facing the motor finance industry, with major lenders on the hook for potentially billions of pounds’ worth of compensation.
Close Brothers will have the chance to overturn October’s ruling.
That said it was unlawful for car dealers to receive commission from lenders without receiving the customer’s fully informed consent to the payment.
If you bought a car using finance, you may be owed compensation.
— Financial Conduct Authority (@TheFCA) November 21, 2024
Find out how to complain and what to expect https://t.co/LUNPtGMGCN#CarFinance #MotorFinance #FinancialServices #FinancialRegulation pic.twitter.com/rrsTwrwplV
The decision opened the door for a potentially fresh wave of complaints from consumers who think they may have been mis-sold car finance in previous years.
Shares in Close Brothers rose more than 6% on Wednesday, and Lloyds was up by more than 4%.
Close Brothers paused new UK motor finance lending following the ruling, but said last month it had resumed a “significant proportion” of the business.
The Financial Conduct Authority (FCA) is carrying out a separate investigation into so-called discretionary commission arrangements, which saw dealers fix higher interest rates on credit agreements, meaning consumers were charged more without knowing.
The FCA said it welcomes the “swiftness” of the Supreme Court’s decision to hear an appeal.
“We previously wrote to the Supreme Court asking it to decide quickly whether it will give permission to appeal and, if it does, to determine the substantive appeal as soon as possible,” the regulator said.
“This is because of the potential impact of any judgment on the motor finance market and the many consumers who rely on it.”
It said it was considering whether to intervene in the case by sharing expertise.
Adrian Dally, director of motor finance at the Finance & Leasing Association, said: “Permission to appeal is very good news indeed.
“The expedited process will give the motor finance sector the needs certainty it needs.”
Close Brothers said it would not be commenting further on the ongoing appeals process.
