LONDON (Reuters) – The UK Supreme Court on Monday rejected a move by finance minister Rachel Reeves to intervene in a landmark case on car loan mis-selling, sending shares in lenders Close Brothers and Lloyds Banking Group sharply lower.
Britain’s Treasury said in January it was worried that a court judgment handed down in October, if allowed to stand on appeal, would make it hard for consumers to get car loans.
The Treasury argued that any customer redress should also be proportionate to the losses suffered by consumers.
By 1615 GMT, shares in Close Brothers had slid 6.8%, having earlier fallen as much as 15% to 295 pence per share. Lloyds shares, which had been higher on the day along with most banks before the ruling, reversed direction and were last down 2.7%.
In what could become one of the UK’s costliest consumer banking scandals, Britain’s motor finance industry was found liable by the Court of Appeal in October for “hidden” commissions following an investigation into historic sales.
Close Brothers and Lloyds are two of a number of lenders with motor finance businesses. Lloyds has set aside a 450 million pound ($567.36 million) provision to cover possible redress. Close Brothers said last week it set aside up to 165 million pounds to cover costs related to the claims.
A spokesperson for the UK Supreme Court said an application by the Treasury was refused, while an application by the UK regulator, the Financial Conduct Authority was granted. The justices did not provide a reason for the refusal, the spokesperson added.
Shore Capital said news the application had been rejected would be a “disappointment to the market”.
($1 = 0.7931 pounds)
(Reporting by Samuel Indyk and Sam Tobin; Editing by Amanda Cooper and Tommy Reggiori Wilkes)
