Court ruling fails to shield UK lenders from $12 billion bill
LONDON
British finance firms behind high interest car loans could have to pay out more than 9 billion pounds ($12 billion) in compensation despite the country's highest court ruling that most of the controversial deals were lawful, a financial watchdog said.
The Supreme Court on Aug. 1 partially overturned judgments that the loans were unlawful, giving relief to banks which had been bracing for compensation claims from millions of car-buyers.
It did, however, uphold one of the three cases, which allows the claimant to seek compensation.
And in a similar but separate probe, the Financial Conduct Authority (FCA) said that the cost of any redress scheme relating to discretionary commission arrangements for car loans would likely be higher than 9 billion pounds.
The FCA estimates that most individuals will probably receive less than £950 in compensation.
The Supreme Court decision mostly overturned Court of Appeal rulings last year that it was unlawful for car dealers to receive a commission on loans without sufficiently informing borrowers.
In some cases, the loans, available from 2007, allowed car dealers to offer higher interest rates in return for a bigger commission from banks.
The ruling means that dealers have some leeway when arranging loans, without requiring explicit consent from borrowers for terms that may benefit lenders.
HSBC bank analysts had suggested before the trial that the total cost to the banking sector could have reached 44 billion pounds.
